China’s Changing Trade Elasticities

Author/Editor:

Jahangir Aziz ; Xiangming Li

Publication Date:

November 1, 2007

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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. Analyses 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.

Series:

Working Paper No. 07/266

Subject:

English

Publication Date:

November 1, 2007

ISBN/ISSN:

9781451868296/1018-5941

Stock No:

WPIEA2007266

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

27

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