Abstract Under the condition of open economy, the paper explores short-run dynamic behavior and long-run trend of price in domestic agricultural products by a double-threshold vector error correction model with 2005-2012 monthly data. The empirical result shows the non-linear adjustment in the secular trend and estimates the threshold effect. The regression of this model confirms the nonlinear relationship between domestic agricultural price and RMB exchange rate in a long-run equilibrium. When the difference between agricultural price and RMB exchange rate is up to the threshold, the response of both agricultural price and RMB exchange rate will change sharply with the opposite direction and return to a long-run equilibrium. However, if it is lower than the threshold, the market force will be too limited, which will requires the government intervention.
2014, Vol. 31 
