Spillover Effects of Exchange Rates : A Study of the Renminbi

This paper estimates how changes in China's exchange rates would affect exports from competitor countries in third-country markets -- in other words, the "spillover effect." The authors use recent theory to develop an identification strategy, with a key role for the competition between China and its developing country competitors in specific products and export destinations. Using disaggregated trade data, they estimate the spillover effect by exploiting the variation across different exporters, importers, products, and time periods. They find a spillover effect that is statistically and quantitatively significant. Their estimates suggest that a 10-percent appreciation of China's real exchange rate boosts a developing country's exports of a typical four-digit Harmonized System product category to third markets by about 1.5 to 2 percent on average. The magnitude of the spillover effect varies systematically with the characteristics of products, such as the extent to which they are differentiated.

Bibliographic Details

Main Authors:	Mattoo, Aaditya, Mishra, Prachi, Subramanian, Arvind
Language:	English
Published:	2012-03-01
Subjects:	ABSOLUTE VALUE, ALTERNATIVE EXCHANGE RATE, BENCHMARKING, BILATERAL EXCHANGE RATE, BILATERAL TRADE, BUSINESS CYCLE, CHECKS, COMPETITIVE ADVANTAGE, COMPETITIVE DEVALUATIONS, COMPETITIVENESS, CONSUMERS, CORRELATION COEFFICIENT, CORRELATION COEFFICIENTS, COUNTRY FIXED EFFECTS, COUNTRY MARKET, COUNTRY MARKETS, COUNTRY OF ORIGIN, COUNTRY TO COUNTRY, CURRENCY, CURRENCY UNIONS, DEFLATORS, DEPENDENT VARIABLE, DEPRECIATION, DEPRECIATIONS, DEPRESSION, DEVALUATIONS, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DIFFERENT CURRENCIES, DOLLAR EXCHANGE RATE, DOMESTIC INFLATION, DOMESTIC PRICE, DOMESTIC PRICES, ECONOMETRIC ESTIMATES, ECONOMIC GROWTH, EFFECT OF EXCHANGE RATE CHANGES, EFFECTIVE EXCHANGE RATE, EFFECTIVE EXCHANGE RATES, ELASTICITY, ELASTICITY OF DEMAND, ELASTICITY OF EXPORTS, ELASTICITY OF SUBSTITUTION, ESTIMATION STRATEGY, EXCESS CAPACITY, EXCHANGE RATE DATA, EXCHANGE RATE FLUCTUATIONS, EXCHANGE RATE MOVEMENTS, EXCHANGE RATE PEGS, EXCHANGE RATE POLICIES, EXCHANGE RATE POLICY, EXCHANGE RATES, EXPENDITURE, EXPORT PERFORMANCE, EXPORTER, EXPORTERS, EXPORTS, FEDERAL RESERVE, FEDERAL RESERVE BANK, FIRM PERFORMANCE, FIXED SHARE, FOREIGN FIRMS, FOREIGN TRADE, GDP, GLOBALIZATION, HUMAN RESOURCES, IMPORT, IMPORT DEMAND, IMPORT PRICES, IMPORTS, INCOME, INDUSTRIAL COUNTRIES, INFLATION, INTANGIBLE, INTERMEDIATE GOODS, INTERNATIONAL BANK, INTERNATIONAL ECONOMICS, INTERNATIONAL FINANCE, INTERNATIONAL FINANCIAL MARKETS, INTERNATIONAL FINANCIAL STATISTICS, INTERNATIONAL MACROECONOMICS, INTERNATIONAL TRADE, LIFE EXPECTANCY, MACROECONOMIC VARIABLE, MACROECONOMICS, MANUFACTURING INDUSTRIES, MARKET ENTRY, MARKET ENTRY COSTS, MARKET EXCHANGE RATES, MARKET VALUATIONS, MIDDLE INCOME COUNTRIES, MONETARY FUND, MULTILATERAL EXCHANGE RATE, NOMINAL BILATERAL EXCHANGE RATE, NOMINAL EXCHANGE RATE, OTHER CURRENCIES, OUTPUT, POLITICAL ECONOMY, POSITIVE COEFFICIENT, POWER PARITY, PRICE INDEX, PRICE INDICES, PRICE LEVEL, PURCHASING, PURCHASING POWER, PURCHASING POWER PARITY, REAL EFFECTIVE EXCHANGE RATE, REAL EFFECTIVE EXCHANGE RATES, REAL EXCHANGE RATE, REAL EXCHANGE RATES, REAL EXPORTS, REGIONAL DUMMIES, RELATIVE PRICE, REVALUATION, ROBUSTNESS CHECKS, SAVINGS, SAVINGS MOTIVE, SAVINGS RATES, STANDARD DEVIATION, STOCK MARKET, STOCK PRICES, SUPPLY CONDITIONS, THIRD MARKET, THIRD MARKETS, TOTAL EXPORTS, TOTAL IMPORTS, TRADE AGREEMENTS, TRADE DATA, TRADE POLICIES, TRANSMISSION MECHANISM, UNEMPLOYMENT, VALUATIONS, VALUE ADDED, WEIGHTS,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20120309093600 https://hdl.handle.net/10986/3278
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