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N° 2003-21 |
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| December 2003 |
| Trade Linkages and Exchange Rates in Asia:
The Role of China |
Agnès Bénassy-Quéré
Amina Lahrèche-Révil |
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China entry into the WTO, coupled with trade surplus and growing forex reserve, could end in a relaxation of the Chinese exchange-rate peg, which has remained stable against the dollar since 1994. This paper explores the consequence of such a move in the light of intra-Asian trade integration.
The impact of a change in the Chinese exchange-rate strategy is assessed through a gravity export equation for a sample of 11 Asian exporters and 23 importers, from 1984 to 2001. The panel estimates allow to disentangle the impact of exchange rate variables on intra-Asian and international trade. Together with traditional gravity variables, exchange rate regimes (characterized by real exchange rates and nominal exchange rate volatility behavior) are found to be significant determinants of Asian exports. Simulations show that changes in the value and volatility of the yuan impact on other Asian countries exports, and could therefore give grounds to a monetary co-operation within Asia. |
Abstract |
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| Exchange rate regime; trade; regional integration; Asia; yuan |
Keywords |
| F15, F31, F33, O53 |
JEL classification |
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