Advanced Search
MyIDEAS: Login

Are Chinese exports sensitive to changes in the exchange rate?

Contents:

Author Info

  • Shaghil Ahmed
Registered author(s):

    Abstract

    This paper builds a model of two types of Chinese exports, those processed and assembled largely from imported inputs ("processed" exports) and "non-processed" exports. Based on this model, the sensitivity of Chinese exports to exchange rate changes is empirically examined. Unlike previous work, the estimation period includes the net real appreciation of the renminbi that has occurred over the past three years. The results show that greater exchange rate appreciation dampens export growth, both for non-processed and processed exports, with the estimated cumulative price elasticity being substantially greater than unity. When the source of the increase in the Chinese real exchange rate is appreciations against the currencies of other emerging Asian trading partners, the effect on processing exports is positive but insignificant, while the effect on non-processing exports is significantly negative. By contrast, when the source of the increase in the Chinese real exchange rate is appreciation against China's advanced-economy trading partners, the effects on both types of exports are negative. These results are consistent with the predictions of the theoretical model. Counterfactual simulations based on the estimated model strongly suggest that if the trade-weighted real renminbi had appreciated at an annual rate of 10 percent per quarter since mid-2005, Chinese real exports would have been roughly 30 percent lower today. Thus greater exchange rate flexibility could contribute to lowering China's huge trade surplus through restraining growth of exports.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.federalreserve.gov/pubs/ifdp/2009/987/default.htm
    Download Restriction: no

    File URL: http://www.federalreserve.gov/pubs/ifdp/2009/987/ifdp987.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 987.

    as in new window
    Length:
    Date of creation: 2009
    Date of revision:
    Handle: RePEc:fip:fedgif:987

    Contact details of provider:
    Postal: 20th Street and Constitution Avenue, NW, Washington, DC 20551
    Web page: http://www.federalreserve.gov/
    More information through EDIRC

    Order Information:
    Web: http://www.federalreserve.gov/pubs/ifdp/order.htm

    Related research

    Keywords: Foreign exchange rates ; Exports;

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Liao, Wei & Shi, Kang & Zhang, Zhiwei, 2012. "Vertical trade and China's export dynamics," China Economic Review, Elsevier, vol. 23(4), pages 763-775.
    2. Yuqing Xing, 2011. "Processing Trade, Exchange Rates and China’s bilateral Trade Balances," GRIPS Discussion Papers 10-30, National Graduate Institute for Policy Studies.
    3. Cheung, Yin-Wong & Chinn, Menzie D. & Qian, XingWang, 2012. "Are Chinese trade flows different?," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 2127-2146.
    4. Heiwai Tang & Yifan Zhang, 2012. "Exchange Rates and the Margins of Trade: Evidence from Chinese Exporters," CESifo Economic Studies, CESifo, vol. 58(4), pages 671-702, December.
    5. Thorbecke, Willem, 2010. "How Would an Appreciation of the Yuan Affect the People's Republic of China's Surplus in Processing Trade?," ADBI Working Papers 219, Asian Development Bank Institute.
    6. Thorbecke, Willem, 2011. "Investigating the effect of exchange rate changes on china's processed exports," Journal of the Japanese and International Economies, Elsevier, vol. 25(2), pages 33-46, June.
    7. Soyoung Kim & Yoonbai Kim, . "The RMB Debate: Empirical Analysis on the Effects of Exchange Rate Shocks in China and Japan," Economics Working Papers 16-01/2014, School of Business Administration, American University of Sharjah.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:fip:fedgif:987. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.