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China’s rise, asymmetric trade shocks and exchange rate regimes

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  • Francesca G. Caselli

Abstract

China’s rapid growth provides a natural experiment to study the effects of asymmetric trade shocks on the competitiveness of OECD countries. The different levels of exposure to Chinese trade competition, as measured using an index of export similarity, triggered asymmetric shocks as China’s trade surged. Motivated by a Ricardian framework, this paper finds that countries with exports similar to those of China experience a loss in competitiveness compared with countries with a different trade structure. Once an additional layer of distinction is introduced between fixed and flexible exchange rate regimes, I find that countries with a fixed exchange rate and with relatively high similarity to China experience a real appreciation.

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  • Francesca G. Caselli, 2019. "China’s rise, asymmetric trade shocks and exchange rate regimes," Review of International Economics, Wiley Blackwell, vol. 27(1), pages 1-35, February.
    • Handle: RePEc:bla:reviec:v:27:y:2019:i:1:p:1-35
    DOI: 10.1111/roie.12353
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    Cited by:

    1. Liming Chen & Zhi Zhang & Ziqing Du & Lingling Deng, 2021. "Heterogeneous determinants of the exchange rate market in China with structural breaks," Applied Economics, Taylor & Francis Journals, vol. 53(59), pages 6839-6854, December.

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