ARE CHINESE IMPORTS SENSITIVE TO EXCHANGE RATE CHANGES?

Willem Thorbecke and Gordon Smith ()
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Gordon Smith: Anderson College, 316 Boulevard, Anderson, SC 29621, USA

China Economic Policy Review (CEPR), 2012, vol. 01, issue 02, 1-15

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% RMB appreciation would increase imports for processing and ordinary imports by 3%–4%. 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.

Keywords: Exchange rate elasticities; China; F32; F41 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (7)

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Working Paper: Are Chinese Imports Sensitive to Exchange Rate Changes? (2012)
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DOI: 10.1142/S1793969012500124

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