- E-ISSN2233-5382
- KCI
E-ISSN : 2233-5382
The China’s Exchange Rate Policy to Export Competition
Lee, Sang-Ki
Abstract
Purpose - The purpose of this paper was to analyze the Chinese government's announcement of the RMB's appreciation on July 1, 2010, and its aim was to ascertain whether the appreciation has affected Chinese export prices by empirically measuring the degree of the exchange rate pass-tough on those prices. Research design, data, and methodology - Using 73 HS trade categories with cross-industry and time-series data, the panel estimation of a fixed-effects model has been applied to measure the degree and stability of any exchange rate pass-through effects. The estimation results show that the export prices of most trade categories were affected by the exchange rate changes. The pass-through effect was generally small, at about -0.485, and statistically significant in most export prices. Results - The empirical results indicate that China would lose its advantage and competitiveness in export if the RMB were appreciated continuously and rapidly because its export goods would no longer operate under strong monopolistic competition. Conclusions - The implications for China's exchange rate policy suggest that it would be better for the RMB to appreciate slowly and gradually rather than radically. It is clear that it would be allow the capital free flow in Chinese overall economic interest to reduce the continuous appreciation pressure on the currency and pave the way for improvements in export distribution competitiveness.
- keywords
- Pass-Through, Export Pricing, Panel Estimation, Fixed-Effects Model
Reference
Barhoumi, K. (2005). Exchange Rate Pass-through into Import Prices in Developing Countries: An Empirical Investigation. Economic Bulletin, 3(26), 1-14.
Froot, K., & Klemperer, P. (1989). Exchange Rate Passthrough when Market Share Matters. American Economic Review, 79(4), 637-654.
Gagnon, J., & Knetter, M. (1995). Markup Adjustment and Exchange Rate Fluctuations: Evidence from Panel Data on Automobile Exports. Journal of International Money and Finance, 14(2), 289-310.
Goldberg, P., & Knetter. M. (1997). Goods Prices and Exchanges Rates: What Have We Learned?. Journal of Economic Literature, 35(3), 1243-1272.
Gron, A., & Swenson, D. (2000). The Pass-through in the US Automobile Market. The Review of Economics and Statistics, 82(2), 316-324.
Gwon, J. H. (2015). A Strategic Effect of Bundling on Product Distribution. Journal of Distribution Science, 13(10), 15-21.
Kim, H. S. (2007). A Study on the Competitive Status and Cooperative Schemes of Korea-China Ports. Journal of Distribution Sciences, 5(2), 55-78
Knetter, M. (1995). Pricing to Market in Response to Unobservable and Observable Shocks. International Economic Journal, 9(2), 1-15.
Marazzi, M., & Sheets, N. (2005). Exchange Rate Pass-through to U.S. Import Prices. Journal of International Finance, 833, 23-53.
Mehrotra, A. (2010). China’s monetary policy and exchange rate. Federal Reserve Bank of San Francisco. Working Paper, No.2010, July.
- Downloaded
- Viewed
- 0KCI Citations
- 0WOS Citations