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Investigating the effect of exchange rate changes on china's processed exports

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  • Thorbecke, Willem

Abstract

Many argue that the renminbi needs to appreciate to rebalance China's trade. However, empirical evidence on the effects of an RMB appreciation on China's exports has been mixed for the largest category of exports, processed exports. Since much of the value-added of these goods comes from parts and components produced in Japan, South Korea, and other East Asian supply chain countries, it is important to control for exchange rate changes in these countries. Employing DOLS techniques and quarterly data, this paper finds that exchange rate appreciations across supply chain countries would cause a much larger drop in processed exports than a unilateral appreciation of the RMB.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 25 (2011)
Issue (Month): 2 (June)
Pages: 33-46

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Handle: RePEc:eee:jjieco:v:25:y:2011:i:2:p:33-46

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Web page: http://www.elsevier.com/locate/inca/622903

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Keywords: Global imbalances Exchange rate elasticities China;

References

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  1. Rose, Andrew K. & Yellen, Janet L., 1989. "Is there a J-curve?," Journal of Monetary Economics, Elsevier, vol. 24(1), pages 53-68, July.
  2. Barry Eichengreen & Yeongseop Rhee & Hui Tong, 2004. "The Impact of China on the Exports of Other Asian Countries," NBER Working Papers 10768, National Bureau of Economic Research, Inc.
  3. Garcia-Herrero, Alicia & Koivu, Tuuli, 2007. "Can the Chinese trade surplus be reduced through exchange rate policy?," BOFIT Discussion Papers 6/2007, Bank of Finland, Institute for Economies in Transition.
  4. Eichengreen, Barry & Tong, Hui, 2007. "Is China's FDI coming at the expense of other countries?," Journal of the Japanese and International Economies, Elsevier, vol. 21(2), pages 153-172, June.
  5. Sarah Y. Tong & Yi Zheng, 2008. "China's Trade Acceleration and the Deepening of an East Asian Regional Production Network," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(1), pages 66-81.
  6. Shaghil Ahmed, 2009. "Are Chinese exports sensitive to changes in the exchange rate?," International Finance Discussion Papers 987, Board of Governors of the Federal Reserve System (U.S.).
  7. Goldstein, Morris & Khan, Mohsin S., 1985. "Income and price effects in foreign trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 20, pages 1041-1105 Elsevier.
  8. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2008. "How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive," NBER Working Papers 14109, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Willem Thorbecke & Gordon Smith, 2012. "Are Chinese Imports Sensitive To Exchange Rate Changes?," China Economic Policy Review (CEPR), World Scientific Publishing Co. Pte. Ltd., vol. 1(02), pages 1250012-1-1.
  2. Willem THORBECKE, 2012. "Investigating China's Disaggregated Processed Exports: Evidence that the RMB matters," Discussion papers 12003, Research Institute of Economy, Trade and Industry (RIETI).
  3. Yamashita, Nobuaki, 2011. "The People’s Republic of China’s Currency and Product Fragmentation," ADBI Working Papers 327, Asian Development Bank Institute.
  4. Tamim Bayoumi & Mika Saito & Jarkko Turunen, 2013. "Measuring Competitiveness," IMF Working Papers 13/100, International Monetary Fund.

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