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The Relationship between Product Complexity and Exchange Rate Elasticities: Evidence from the People's Republic of China's Manufacturing Industries

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  • Willem THORBECKE
  • CHEN Chen
  • Nimesh SALIKE

Abstract

More complex products are less substitutable in international trade and may therefore have lower price elasticities. We investigate this issue using 960 types of Chinese manufactured exports to 190 partner countries disaggregated at the Harmonized System 4-digit level. We measure complexity using Hausmann and Hidalgo's (2009) product complexity index. We find that price elasticities are lower for more complex goods. These results imply that the People's Republic of China can reduce its exporters' exposure to tariffs, trade wars, and exchange rate volatility by upgrading its export basket.

Suggested Citation

  • Willem THORBECKE & CHEN Chen & Nimesh SALIKE, 2020. "The Relationship between Product Complexity and Exchange Rate Elasticities: Evidence from the People's Republic of China's Manufacturing Industries," Discussion papers 20075, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:20075
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    References listed on IDEAS

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