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

Author

Listed:
  • Thorbecke, Willem

    (Asian Development Bank Institute)

Abstract

Many argue that the yuan needs to appreciate to rebalance the People's Republic of China's trade. However, empirical evidence on the effects of a CNY appreciation on the People's Republic of China's 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

  • Thorbecke, Willem, 2010. "Investigating the Effect of Exchange Rate Changes on the People's Republic of China's Processed Exports," ADBI Working Papers 202, Asian Development Bank Institute.
    • Handle: RePEc:ris:adbiwp:0202
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    File URL: http://www.adbi.org/working-paper/2010/03/04/3631.exchange.rate.changes.prc.exports/
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    Citations

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    Cited by:

    1. Morgan, Peter J., 2012. "The role of macroeconomic policy in rebalancing growth," Journal of Asian Economics, Elsevier, vol. 23(1), pages 13-25.
    2. Francesco Aiello & Graziella Bonanno & Alessia Via, 2015. "Again on trade elasticities: evidence from a selected sample of countries," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 259-287, December.
    3. Thorbecke, Willem, 2015. "China–US trade: A global outlier," Journal of Asian Economics, Elsevier, vol. 40(C), pages 47-58.
    4. Philip I. Levy, 2011. "The United States and China: macroeconomic imbalances and economic diplomacy," AEI Economics Working Papers 49156, American Enterprise Institute.
    5. Bernhardt, Thomas, 2016. "South-South trade and South-North trade: which contributes more to development in Asia and South America? Insights from estimating income elasticities of import demand," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.

    More about this item

    Keywords

    exchange rate changes prc; prc processed exports; global imbalances; exchange rate elasticities; china;
    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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