China's Changing Trade Elasticities

29 Pages Posted: 3 Dec 2007

See all articles by Jahangir Aziz

Jahangir Aziz

International Monetary Fund (IMF) - Asia and Pacific Department

Xiangming Li

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2007

Abstract

China's sectoral trade composition, product quality mix, and import content of processing exports have all changed substantially during the past decade. This has rendered trade elasticities estimated using aggregate data highly unstable, with more recent data pointing to significantly higher demand and price elasticities. Sectoral differences in these parameters are also very wide. All this suggests greater caution in using historical data to simulate the response of the China's economy to external shocks and exchange rate changes. Analyzes based on models whose estimated coefficients largely reflect the China of the 1980s and 1990s are likely to turn out to be wrong, perhaps even dramatically.

Keywords: Trade, China, People's Republic of, Balance of trade, Exchange rates

Suggested Citation

Aziz, Jahangir and Li, Xiangming, China's Changing Trade Elasticities (November 2007). IMF Working Paper No. 07/266, Available at SSRN: https://ssrn.com/abstract=1042282

Jahangir Aziz (Contact Author)

International Monetary Fund (IMF) - Asia and Pacific Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Xiangming Li

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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