## Spillover Effects of Exchange Rates: A Study of the Renminbi

_IMF Working Papers, March 1, 2012_

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## Bibliographic details
- Authors: Arvind Subramanian, Prachi Mishra, Aaditya Mattoo
- Published: March 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475502626.001

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### Summary
- The paper estimates the impact of China's exchange rate changes on exports of competitor countries in third markets, termed the "spillover effect".
- Uses recent theory to develop an identification strategy where competition between China and its developing country competitors in specific products and destinations plays a key role.
- Exploits variation across exporters, importers, product, and time using disaggregated trade data.
- Finds robust evidence of a statistically and quantitatively significant spillover effect.

### Key Findings and Quantitative Results
- A 10 percent appreciation of China's real exchange rate boosts on average a developing country's exports of a typical 4-digit HS product category to third markets by about 1.5-2 percent.
- The magnitude of the spillover effect varies systematically with product characteristics as implied by theory.

### Methodology and Empirical Strategy
- Identification strategy built on recent theoretical developments emphasizing competition between China and developing-country competitors at the product-destination level.
- Empirical approach exploits disaggregated trade data variation across:
  - exporters,
  - importers,
  - product, and
  - time.

### Subjects and Keywords (as provided)
- Competition, Exchange rates, Exports, Financial markets, Foreign exchange, Imports, International trade, Real exchange rates
- Asia and Pacific, China, Competition, developing country, digit product, exchange rates, exports, importer currency, importer wrt China, importer-exporter-product level, importer-product year level, Imports, price level, product time, Real exchange rates, spillover, spillover effect, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/spillover-effects-of-exchange-rates-a-study-of-the-renminbi-25802_