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The Effect of Exchange Rate Changes on Trade in East Asia

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  • Thorbecke, Willem

    (Asian Development Bank Institute)

Abstract

This paper considers how exchange rates affect East Asian trade. The evidence indicates that exports produced within regional production networks depend on exchange rates throughout the region while labor-intensive exports depend on exchange rates in the exporting country. These results make sense since the majority of the value-added of processed exports come from imported parts and components while most of the value-added of labor-intensive exports comes from the domestic economy. Recent findings also indicate that imbalances between the People’s Republic of China (PRC) and the United States are a major outlier and that an appreciation of the PRC yuan (CNY) is necessary to reduce these imbalances.

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File URL: http://www.adbi.org/files/2011.01.21.wp263.effect.exchange.rate.changes.trade.east.asia.pdf
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Bibliographic Info

Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 263.

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Length: 21 pages
Date of creation: 20 Jan 2011
Date of revision:
Handle: RePEc:ris:adbiwp:0263

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Keywords: global imbalances exchange rate elasticities prc; exchange rate changes east asia;

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References

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  8. Ouyang, Alice Y. & Rajan, Ramkishen S. & Willett, Thomas D., 2010. "China as a reserve sink: The evidence from offset and sterilization coefficients," Journal of International Money and Finance, Elsevier, vol. 29(5), pages 951-972, September.
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Citations

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Cited by:
  1. Glenn Hoggarth & Hui Tong, 2007. "The impact of yuan revaluation on the Asian region," Bank of England working papers 329, Bank of England.
  2. 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.
  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. Alicia García-Herrero & Tuuli Koivu, 2009. "China's exchange rate policy and Asian trade," BIS Working Papers 282, Bank for International Settlements.
  5. Natasha Hamilton-Hart, 2012. "Regional and multi-level governance: East Asian leadership after the global financial crisis," Asia Europe Journal, Springer, vol. 9(2), pages 237-254, March.
  6. Wu, Po-Chin & Liu, Shiao-Yen & Pan, Sheng-Chieh, 2013. "Nonlinear bilateral trade balance-fundamentals nexus: A panel smooth transition regression approach," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 318-329.
  7. Volz, Ulrich, 2013. "RMB internationalisation and currency co-operation in East Asia," Working Papers 125, University of Leipzig, Faculty of Economics and Management Science.
  8. 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.
  9. Yoko Oguro, 2011. "The Sensitivity of Export Quantities to Exchange Rates in the Context of Intra-Industry Trade," Global COE Hi-Stat Discussion Paper Series gd10-167, Institute of Economic Research, Hitotsubashi University.
  10. Yoko Oguro, 2007. "The Influence of Intra-Industry Trade on Export Sensitivity to Exchange Rates," Hi-Stat Discussion Paper Series d07-222, Institute of Economic Research, Hitotsubashi University.
  11. Hamilton-Hart, Natasha, 2011. "Distribution, Domestic Politics and Monetary Cooperation in East Asia," ADBI Working Papers 332, Asian Development Bank Institute.

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