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Investigating the Effect of Exchange Rate Changes on the People’s Republic of China’s Processed Exports

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  • Willem Thorbecke

    (Asian Development Bank Institute)

Abstract

Many argue that the yuan needs to appreciate to rebalance the Peoples Republic of Chinas trade. However, empirical evidence on the effects of a CNY appreciation on the Peoples Republic of Chinas exports has been mixed for the largest category of exports, processed exports. Since much of the value-added of these goods comes from parts and components produced in Japan, the Republic of Korea, and other East Asian supply chain countries, it is important to control for exchange rate changes in these countries. Employing dynamic ordinary least squares, or DOLS, techniques and quarterly data, this paper finds that exchange rate appreciations across supply chain countries would cause a much larger drop in processed exports than a unilateral appreciation of the yuan.

Suggested Citation

  • Willem Thorbecke, 2010. "Investigating the Effect of Exchange Rate Changes on the People’s Republic of China’s Processed Exports," Finance Working Papers 21989, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:financ:21989
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    References listed on IDEAS

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    More about this item

    Keywords

    China; exchange rate policy; exchange rate appreciations; trade;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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