EconStor >
Asian Development Bank Institute (ADBI), Tokyo >
ADBI Working Paper Series, Asian Development Bank Institute >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/53681
  
Title:Investigating the effect of exchange rate changes on transpacific rebalancing PDF Logo
Authors:Thorbecke, Willem
Komoto, Ginalyn
Issue Date:2010
Series/Report no.:ADBI working paper series 247
Abstract:This paper investigates the role that exchange rate changes can play in rebalancing transpacific trade. It presents evidence from a gravity model indicating that the exports from the People's Republic of China (PRC) to the United States (US) are a key outlier in the global economy and that imbalances between the PRC and the US have remained large during the financial crisis that began in September 2008. It then reports that an appreciation of the yuan against the dollar would be required to rebalance bilateral trade between the US and the PRC. In the case of multilateral trade between the US and the rest of the world, on the other hand, the evidence indicates that a depreciation of the dollar would not substantially reduce the US global trade deficit. In the case of Asia's exports, results presented here and elsewhere indicate that: (i) sophisticated exports produced within regional production networks depend on exchange rates throughout the region; (ii) labor-intensive exports from developing Asian countries are strongly influenced by each country's own exchange rate; (iii) developing Asian countries compete extensively with each other in exports to third markets; (iv) a currency appreciation in developing Asia would increase capital and consumption goods imports; and (v) exchange rate volatility deters parts and components trade in Asia. These findings imply that Asia and the rest of the world would benefit if East Asian currencies could appreciate together against external currencies while maintaining relative currency stability within the region.
JEL:F32
F41
Document Type:Working Paper
Appears in Collections:ADBI Working Paper Series, Asian Development Bank Institute

Files in This Item:
File Description SizeFormat
640577695.pdf298.45 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/53681

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.