Vertical Trade and China's Export Dynamics

Wei Liao (), Kang Shi () and Zhiwei Zhang
Additional contact information
Zhiwei Zhang: China International Capital Corporation

No 102010, Working Papers from Hong Kong Institute for Monetary Research

Abstract: This paper examines how China's exports are affected by exchange rate shocks from countries who supply intermediate inputs to China. We build a simple small open economy model with intermediate goods trade to show that due to the intraregional trade in intermediate goods, a devaluation of other Asian currencies does not necessarily damage China's exports, as imported intermediate goods could become cheaper. This channel through the cost of intermediate goods depends critically on the share of intermediate goods used in China's export goods production and the degree of exchange rate pass-through in imported intermediate goods prices. If prices for intermediate goods are not very sticky, the effect through this channel could be large and China's exports could even benefit. We find the above findings do not depend on China's choice of currency invoicing between RMB and the US dollar or the choice between fixed and flexible exchange rate regimes.

Keywords: Vertical Trade; Exchange Rates; Export Dynamics; Currency Invoicing (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2010-04
New Economics Papers: this item is included in nep-int, nep-sea and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.hkimr.org/uploads/publication/100/ub_full_0_2_243_wp-no-10_2010.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.hkimr.org/uploads/publication/100/ub_full_0_2_243_wp-no-10_2010.pdf [301 Moved Permanently]--> http://www.aof.org.hk/research/HKIMR/uploads/publication/100/ub_full_0_2_243_wp-no-10_2010.pdf [301 Moved Permanently]--> https://www.aof.org.hk/research/HKIMR/uploads/publication/100/ub_full_0_2_243_wp-no-10_2010.pdf)

Related works:
Journal Article: Vertical trade and China's export dynamics (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hkm:wpaper:102010

Access Statistics for this paper

More papers in Working Papers from Hong Kong Institute for Monetary Research Contact information at EDIRC.
Bibliographic data for series maintained by HKIMR ().