Search

Begin New Search Political Geography China Publishing Institution Board of Governors of the Federal Reserve System

1. Are Chinese Exports Sensitive to Changes in the Exchange Rate?

Author:
Shaghil Ahmed
Publication Date:
12-2009
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper builds a model of two types of Chinese exports, those processed and assembled laregely from imported inputs ("processed" exports) and "non- processed" exports. Based on this model, the sensitivity of Chinese exports to exchange rate changes is empirically examined. Unlike previous work, the estimation period includes the net real appreciation of the renminbi that has occurredoverthepastthreeyears. Theresultsshowthatgreaterexchangerate appreciation dampens export growth, both for non-processed and processed ex- ports, with the estimated cumulative price elasticity being substantially greater thanunity. WhenthesourceoftheincreaseintheChineserealexchangerateis appreciations against the currencies of other emerging Asian trading partners, the e§ect on processing exports is positive but insignÖcant, while the e§ect on non-processing exports is signiÖcantly negative. By contrast, when the source of the increase in the Chinese real exchange rate is appreciation against Chinaís advanced-economy trading partners, the e§ects on both types of exports are negative. These results are consistent with the predictions of the theoretical model. Counterfactualsimulationsbasedontheestimatedmodelstronglysug- gest that if the trade-weighted real renminbi had appreciated at an annual rate of 10 percent per quarter since mid-2005, Chinese real exports would have been roughly 30 percent lower today. Thus greater exchange rate áexibility could contribute to lowering Chinaís huge trade surplus through restraining growth of exports.
Topic:
Economics, International Trade and Finance, Exchange Rate Policy, and Exports
Political Geography:
China and Asia

2. The Role of China in Asia: Engine, Conduit, or Steamroller?

Author:
Beth Anne Wilson, Jane T. Haltmaier, Shaghil Ahmed, Brahima Coulibaly, Ross Knippenberg, Sylvain Leduc, and Mario Marazzi
Publication Date:
09-2007
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper assesses China's role in Asia as an independent engine of growth, as a conduit of demand from the industrial countries, and as a competitor for export markets. We provide both macroeconomic and microeconomic evidence. The macroeconomic analysis focuses on the impact of U.S. and Chinese demand on the output of the Asian economies by estimating growth comovements and VARs. The results suggest an increasing role of China as an independent source of growth. The microeconomic analysis decomposes trade into basic products, parts and components, and finished goods. We find a large role for parts and components trade consistent with China playing an important and increasing role as a conduit. We also estimate some regressions that show that China's increasing presence in export markets has had a negative effect on exports of some products for some other Asian economies, but not for other products, including those of the important electronic high-technology industry.
Topic:
Development, Economics, International Trade and Finance, and Markets
Political Geography:
United States, China, and Asia

3. Flying Geese or Sitting Ducks: China's Impact on the Trading Fortunes of other Asian Economies

Author:
Alan J. Ahearne, John G. Fernald, John W. Schindler, and Prakash Loungani
Publication Date:
12-2006
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper updates our earlier work (Ahearne, Fernald, Loungani and Schindler, 2003) on whether China, with its huge pool of labor and an allegedly undervalued exchange rate, is hurting the export performance of other emerging market economies in Asia. We continue to find that while exchange rates matter for export performance, the income growth of trading partners matters far more. This suggests the potential for exports of all Asian economies to grow in harmony as long as global growth is strong. We also examine changes in export shares of Asian economies to the U.S. market and find evidence that dramatic changes in shares are taking place. Many of these changes are consistent with a 'flying geese' pattern in which China moves into the product space vacated by the Asian NIEs or with greater integration of trade across Asia in the production of final goods. Nevertheless, China's dramatic gains in recent years do increase the pressure on Asian economies, particularly in ASEAN and South Asia, to seek areas of comparative advantage.
Topic:
Development, Economics, Foreign Exchange, International Trade and Finance, and Markets
Political Geography:
China, South Asia, and Asia

4. Adjusting Chinese Bilateral Trade Data: How Big is China's Trade Surplus

Author:
John W. Schindler and Dustin H. Beckett
Publication Date:
04-2005
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Hong Kong plays a prominent role as a re-exporter of a large percentage of trade bound for or coming from China. Current reporting practices in China and its trading partners do not fully reflect this role and therefore provide a misleading picture of the origin or ultimate destination of Chinese exports and imports. We adjust bilateral trade data for both China and its trading partners to correct for this problem. We also correct for differences due to markups in Hong Kong and different standards for reporting trade (c.i.f. versus f.o.b.). For 2003, we estimate that China's overall trade surplus was between $53 billion and $126 billion, larger than that reported in official Chinese data, but smaller than that reported by China's trading partners. We also provide evidence that, in general, the actual origin of a good that is transshipped through Hong Kong is correctly reported by the importing country, but the final destination of such goods is not correctly reported by the exporting country.
Topic:
Economics and International Trade and Finance
Political Geography:
United States, China, and Hong Kong

5. Exchange Rate Pass-through to U.S. Import Prices: Some New Evidence

Author:
Jaime Marquez, Mario Marazzi, Nathan Sheets, Joseph Gagnon, Robert J. Vigfusson, Jon Faust, Robert F. Martin, Trevor Reeve, and John Rogers
Publication Date:
04-2005
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper documents a sustained decline in exchange rate pass-through to U.S. import prices, from above 0.5 during the 1980s to somewhere in the neighborhood of 0.2 during the last decade. This decline in the pass-through coefficient is robust to the measure of foreign prices that is included in the regression (i.e., CPI versus PPI), whether the estimation is done in levels or differences, and whether U.S. prices are included as an explanatory variable. Notably, the largest estimates of pass-through are obtained when commodity prices are excluded from the regression. In this case, the pass-through coefficient captures both the direct effect of the exchange rate on import prices and an indirect effect operating through changes in commodity prices. Our work indicates that an increasing share of exchange rate pass-through has occurred through this commodity-price channel in recent years. While the source of the decline in passthrough is difficult to pin down with certainty, our work points to several factors, including the reduced share of (commodity-intensive) industrial supplies in U.S. imports and the increased presence of Chinese exporters in U.S. markets. We detect a particular step down in the passthrough coefficient around the time of the Asian financial crisis and document a shift in the export pricing behavior of emerging Asian firms around that time.
Topic:
Economics, Industrial Policy, and International Trade and Finance
Political Geography:
United States and China

6. Defense Science Board 2003 Summer Study on DoD Roles and Missions in Homeland Security, Volume B

Publication Date:
09-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
During the Cold War, the United States developed and refined intelligence capabilities upon a number of key factors: Known adversaries, the Soviet Union and the Communist Bloc, including China and North Korea; Known geographic boundaries: that of the communist nation states (We knew where to look); Known conflict of ideology: communism vs. capitalism; Observable (with some degree of confidence over time) military capabilities of adversaries; and Indications (and in some cases, warning - developed over the years) of activity potentially hazardous to the United States and NATO.
Topic:
Defense Policy, National Security, and Science and Technology
Political Geography:
United States, China, and North Korea

7. Is China "Exporting Deflation"?

Author:
Steven B. Kamin, Mario Marazzi, and John W. Schindler
Publication Date:
01-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
In the past few years, observers increasingly have pointed to China as a source of downward pressure on global prices. This paper evaluates the theoretical and empirical evidence bearing on the question of whether China's buoyant export growth has led to significant changes in the inflation performance of its trading partners. This evidence suggests that the impact of Chinese exports on global prices has been, while non-negligible, fairly modest. On a priori grounds, our theoretical analysis suggests that China's economy is still too small relative to the world economy to have much effect on global inflation: a back-of-the-envelope calculation puts that effect at about 1/3 percentage point in recent years. In terms of the empirical evidence, we identify a statistically significant effect of U.S. imports from China on U.S. import prices, but given the size of this effect and the relatively low share of imports in U.S. GDP, the ultimate impact on the U.S. consumer prices has likely been quite small. Moreover, imports from China had little apparent effect on U.S. producer prices. Finally, using a multi-country database of trade transactions, we estimate that since 1993, Chinese exports lowered annual import inflation in a large set of economies by 1/4 percentage point or less on average, similar to the prediction of our theoretical model.
Topic:
Economics and International Trade and Finance
Political Geography:
China and Asia

8. China and Emerging Asia: Comrades or Competitors?

Author:
John W. Schindler, John G. Fernald, Prakash Loungani, and Alan J. Ahearne
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Do increases in China's exports reduce exports of other emerging Asian economies? We find that correlations between Chinese export growth and that of other emerging Asian economies are actually positive (though usually not significant), even after controlling for trading-partner income growth and real effective exchange rates. We also present results from a VAR estimation of aggregate trade equations on the relative importance of foreign income and exchange rates in determining Asian export growth. Although exchange rates do matter for export performance, the income growth of trading partners matters even more. In addition, we examine specific products and find evidence that a considerable shifting of trade patterns is taking place, consistent with a 'flying geese' pattern in which China and ASEAN-4 move into the product space vacated by the NIEs. Our results suggest that China and emerging Asia are both comrades (overall) and competitors (in specific products).
Topic:
Economics and Emerging Markets
Political Geography:
China and Asia

9. Russia in the International System

Publication Date:
06-2001
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Russia's Foreign Policy Russian foreign policy in the coming years will be characterized by weakness; frustration--primarily with the United States as the world's preeminent power--over Russia's diminished status; generally cautious international behavior; and a drive to resubjugate, though not reintegrate, the other former Soviet states. The international situation affords Russia time to concentrate on domestic reforms because, for the first time in its history, it does not face significant external threats. But rather than use the breathing space for domestic reforms, Putin is as much--if not more--focused on restoring Russia's self-defined rightful role abroad and seeking to mold the CIS into a counterweight to NATO and the European Union. The Outside World's Views of Russia Russia does not have any genuine allies. Some countries are interested in good relations with Russia, but only as a means to another end. For example, China sees Russia as a counterweight to the United States but values more highly its ties with the United States. Some countries see Russia as a vital arms supplier but resent Russia also selling arms to their rivals (China-India, Iran-Iraq). Pro-Russia business lobbies exist in Germany, Italy, Turkey, and Israel (one-fifth of whose population now consists of Soviet émigres), but they do not single-handedly determine national policies. Europe is the only region that would like to integrate Russia into a security system, but it is divided over national priorities and institutional arrangements as well as put off by some Russian behavior. Most CIS governments do not trust their colossal neighbor, which continues to show an unsettling readiness to intervene in their internal affairs, though they know Russia well and are to a considerable degree comfortable in dealing with it. Turkey has developed an improved dialogue and an unprecedented number of economic ties with Russia during the post-Cold War period, but this more positive pattern of relations has not fully taken root, and Ankara remains suspicious of Moscow's intentions. Since the collapse of the Soviet Union, Moscow's role in the Middle East has been reduced, but Israel, Syria, Egypt, Libya, and Iraq all favor good relations with Russia. Mutual interests also override disagreements in Russian-Iranian relations, but Tehran is wary of Russian behavior, particularly toward Saddam Hussein. India still trusts Russia--a sentiment that is perhaps a residue of the genuine friendship of Cold War days--but clearly not in the same way it once did, and New Delhi fears that weakness will propel Russia into doing things that could drive India further away. In East Asia, the most substantial breakthrough has been the resurrected relationship between Russia and China, one that entails significant longer-term risk for Russia. Other countries in the region value their links with Moscow as a means to balance a more powerful China, or as a useful component of their larger political and economic strategies, but Russia's role in East Asia--as elsewhere--remains constrained by the decline in its political, military, and economic power over the last decade. Russia's Weakness Russia's weakness stems from long-term secular trends and from its domestic structure. In essence, the old nomenklatura and a few newcomers have transformed power into property on the basis of personal networks and created an equilibrium resting on insider dealings. These insiders may jockey for position but have a vested interest in preserving the system. The public does not like the system but is resigned to it and gives priority to the preservation of order. As for the economy, it is divided into a profitable, internationally integrated sector run by oligarchs and a much larger, insulated, low-productivity, old-style paternalistic sector that locks Russia into low growth. No solace will be forthcoming from the international business and energy worlds. They do not expect the poor commercial climate to improve greatly and will not increase investments much beyond current levels until it does. Militarily, Russia will also remain weak. Its nuclear arsenal is of little utility, and Moscow has neither the will nor the means to reform and strengthen its conventional forces. Hope for the Future? The best hope for change in Russia lies with the younger generation. Several participants reported that under-25 Russians have much more in common with their US counterparts, including use of the Internet, than with older Soviet generations. But there was some question over whether the new generation would change the system or adapt to it. Others placed some hope in international institutions, for instance the World Trade Organization, eventually forcing Russia to adapt to the modern world. Dissenting Views Some participants dissented from the overall forecast of depressing continuity. The keynote speaker, James Billington, stated that Russia would not be forever weak and that the current confusion would end in a few years either through the adoption of authoritarian nationalism or federated democracy. One scholar felt the Chechen war was feeding ethnic discord in other areas of the Federation to which Moscow would respond with increased authoritarianism, not necessarily successfully. Finally, a historian observed that the patience of Russians is legendary but not infinite, meaning that we should not be overly deterministic.
Topic:
International Relations, Foreign Policy, and Development
Political Geography:
Russia, United States, China, Middle East, and Israel

10. Second Annual Report

Publication Date:
05-2001
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The Commission considerably broadened its activities in its second full year, monitoring religious-freedom violations worldwide and increasing the number of countries it would study in depth. In July, the Commission wrote to the Secretary of State to recommend that Laos, Democratic People's Republic of Korea, Saudi Arabia, and Turkmenistan be added to the list of “countries of particular concern” as provided for in the International Religious Freedom Act of 1998 (IRFA). It also recommended that Burma, China, Iran, Iraq, Sudan, the Milosevic regime in Serbia and the Taliban in Afghanistan remain on the list. In addition, it wrote that India, Pakistan, Uzbekistan, and Vietnam are serious violators of religious freedom deserving careful State Department monitoring; it also expressed concerns about sectarian violence in Indonesia and Nigeria.
Topic:
Foreign Policy, Diplomacy, Human Rights, and Religion
Political Geography:
Pakistan, Afghanistan, United States, China, Iraq, Iran, Sudan, Taliban, and Vietnam