Are Chinese Imports Sensitive to Exchange Rate Changes?

Willem Thorbecke and Gordon Smith

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Estimating the price elasticity of China's imports is difficult because many imports are used to produce exports and because the real effective exchange rate has remained fairly stable. To circumvent the first problem, we control for re-exports, and to increase the discriminatory power of the tests, we employ a panel data set including imports from 25 countries. The results indicate that a 10 percent RMB appreciation would increase imports for processing and ordinary imports by three to four percent. As China climbs the value chain, the potential for import substitution and hence the import price elasticity should increase. Thus, a renminbi appreciation should help to raise China's imports and rebalance its economy.

Pages: 26 pages
Date: 2012-02
New Economics Papers: this item is included in nep-ifn and nep-tra
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: ARE CHINESE IMPORTS SENSITIVE TO EXCHANGE RATE CHANGES? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:12007

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