Are Chinese Imports Sensitive to Exchange Rate Changes?
AbstractEstimating the price elasticity of China's imports is difficult because many imports are used to produce exports and because the real effective exchange rate has remained fairly stable. To circumvent the first problem, we control for re-exports, and to increase the discriminatory power of the tests, we employ a panel data set including imports from 25 countries. The results indicate that a 10 percent RMB appreciation would increase imports for processing and ordinary imports by three to four percent. As China climbs the value chain, the potential for import substitution and hence the import price elasticity should increase. Thus, a renminbi appreciation should help to raise China's imports and rebalance its economy.
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Bibliographic InfoPaper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 12007.
Length: 26 pages
Date of creation: Feb 2012
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Other versions of this item:
- 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.
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-20 (All new papers)
- NEP-IFN-2012-02-20 (International Finance)
- NEP-TRA-2012-02-20 (Transition Economics)
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