IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Investigating the Effect of Exchange Rate Changes on Transpacific Rebalancing

  • Thorbecke, Willem

    (Asian Development Bank Institute)

  • Komoto, Ginalyn

    (Asian Development Bank Institute)

This paper investigates the role that exchange rate changes can play in rebalancing transpacific trade. It presents evidence from a gravity model indicating that the exports from the People’s Republic of China (PRC) to the United States (US) are a key outlier in the global economy and that imbalances between the PRC and the US have remained large during the financial crisis that began in September 2008. It then reports that an appreciation of the yuan against the dollar would be required to rebalance bilateral trade between the US and the PRC. In the case of multilateral trade between the US and the rest of the world, on the other hand, the evidence indicates that a depreciation of the dollar would not substantially reduce the US global trade deficit. In the case of Asia’s exports, results presented here and elsewhere indicate that: (i) sophisticated exports produced within regional production networks depend on exchange rates throughout the region; (ii) labor-intensive exports from developing Asian countries are strongly influenced by each country’s own exchange rate; (iii) developing Asian countries compete extensively with each other in exports to third markets; (iv) a currency appreciation in developing Asia would increase capital and consumption goods imports; and (v) exchange rate volatility deters parts and components trade in Asia. These findings imply that Asia and the rest of the world would benefit if East Asian currencies could appreciate together against external currencies while maintaining relative currency stability within the region.

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.adbi.org/files/2010.08.08.wp247.effect.rate.changes.transpacific.rebalancing.pdf
File Function: Full text
Download Restriction: no

Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 247.

as
in new window

Length: 28 pages
Date of creation: 08 Sep 2010
Date of revision:
Handle: RePEc:ris:adbiwp:0247
Contact details of provider: Postal: Kasumigaseki Building 8F, 3-2-5, Kasumigaseki, Chiyoda-ku,, Tokyo 100-6008, Japan
Phone: (81-3)3593-5500
Fax: (81-3) 3593-5571
Web page: http://www.adbi.org/Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. 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.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:ris:adbiwp:0247. 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: (Robert Hugh Davis)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.