The Impacts of Renminbi Appreciation on Trades Flows and Reserve Accumulation in a Monetary Trade Model
AbstractGiven the rapidly growing reserves in Asia (China, Japan, Korea, Taiwan) and the pressures from trading partners to revalue, there is a need to examine commercial policy in more than a pure barter model. Here we evaluate the joint impacts of exchange rate appreciation on trade flows and country surpluses using a general equilibrium trade model with a simple monetary structure in which the trade surplus is endogenously determined in the exchange rate setting country and the exchange rate is exogenous. We illustrate its application to the Chinese case using calibration to 2005 data. Our results, while elasticity dependent, suggest that the impacts of Renminbi (RMB) revaluation on the surplus are proportionally larger than on trade flows, and that changes in trade flows can be substantial. Different treatments of China's processing trade have small impact on changes in China's trade flow under RMB appreciation, but significant impacts on the change in the surplus. Results are elasticity dependent; larger substitution elasticities in preferences yield larger effects on trade flows and the surplus.
Download InfoIf 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.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13586.
Date of creation: Nov 2007
Date of revision:
Publication status: published as Whalley, John & Wang, Li, 2011. "The impacts of Renminbi appreciation on trade flows and reserve accumulation in a monetary trade model," Economic Modelling, Elsevier, vol. 28(1), pages 614-621.
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Whalley, John & Wang, Li, 2011. "The impacts of Renminbi appreciation on trade flows and reserve accumulation in a monetary trade model," Economic Modelling, Elsevier, vol. 28(1), pages 614-621.
- Whalley, John & Wang, Li, 2011. "The impacts of Renminbi appreciation on trade flows and reserve accumulation in a monetary trade model," Economic Modelling, Elsevier, vol. 28(1-2), pages 614-621, January.
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- F3 - International Economics - - International Finance
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-10 (All new papers)
- NEP-CBA-2007-11-10 (Central Banking)
- NEP-CNA-2007-11-10 (China)
- NEP-INT-2007-11-10 (International Trade)
- NEP-MAC-2007-11-10 (Macroeconomics)
- NEP-SEA-2007-11-10 (South East Asia)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jaime Marquez & John W. Schindler, 2006. "Exchange-rate effects on China's trade: an interim report," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
- Imam, Hasan & Whalley, John, 1982. "General equilibrium with price intervention policies: a computational approach," Journal of Public Economics, Elsevier, vol. 18(1), pages 105-119, June.
- Philippe Bacchetta & Eric van Wincoop, 2006.
"Incomplete information processing: a solution to the forward discount puzzle,"
Federal Reserve Bank of San Francisco, issue Jun.
- Philippe Bacchetta & Eric van Wincoop, 2005. "Incomplete Information Processing: A Solution to the Forward Discount Puzzle," Working Papers 05.03, Swiss National Bank, Study Center Gerzensee.
- Philippe Bacchetta & Eric van Wincoop, 2006. "Incomplete information processing: a solution to the forward discount puzzle," Working Paper Series 2006-35, Federal Reserve Bank of San Francisco.
- Koichiro Kamada & Izumi Takagawa, 2005.
"Policy Coordination in East Asia and across the Pacific,"
Hi-Stat Discussion Paper Series
d05-101, Institute of Economic Research, Hitotsubashi University.
- Koichiro Kamada & Izumi Takagawa, 2005. "Policy coordination in East Asia and across the Pacific," International Economics and Economic Policy, Springer, vol. 2(4), pages 275-306, December.
- Jaime Marquez & John W. Schindler, 2006. "Exchange-rate effects on China's trade: an interim report," Working Paper Series 2006-41, Federal Reserve Bank of San Francisco.
- Willenbockel, Dirk, 2006. "Structural Effects of a Real Exchange Rate Revaluation in China: A CGE Assessment," MPRA Paper 920, University Library of Munich, Germany.
- Sabri, Nidal Rachid & Peeters, Marga & Abulaben, Diama K., 2012. "The impact of exchange rate volatility on trade integration among North and South Mediterranean countries," MPRA Paper 38080, University Library of Munich, Germany.
- Yan Dong & John Whalley, 2011.
"Gains and Losses from Potential Bilateral US-China Trade Retaliation,"
NBER Working Papers
17366, National Bureau of Economic Research, Inc.
- Dong, Yan & Whalley, John, 2012. "Gains and losses from potential bilateral US–China trade retaliation," Economic Modelling, Elsevier, vol. 29(6), pages 2226-2236.
- John Whalley, 2012. "External Sector Rebalancing and Endogenous Trade Imbalance Models," Contemporary Economics, University of Finance and Management in Warsaw, vol. 6(4), December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.