TY - JOUR
T1 - The relationship between product complexity and exchange rate elasticities
T2 - Evidence from the People’s Republic of China’s manufacturing industries
AU - Thorbecke, Willem
AU - Chen, Chen
AU - Salike, Nimesh
N1 - Funding Information:
⁄Willem Thorbecke (corresponding author): Research Institute of Economy, Trade and Industry, Tokyo, Japan; and International Business School Suzhou, Xi’an Jiaotong–Liverpool University, Suzhou, People’s Republic of China (PRC). E-mail: willem-thorbecke@rieti.go.jp; Chen Chen: International Business School Suzhou, Xi’an Jiaotong–Liverpool University, Suzhou, PRC. E-mail: Chen.Chen02@xjtlu.edu.cn; Nimesh Salike: International Business School Suzhou, Xi’an Jiaotong–Liverpool University, Suzhou, PRC. E-mail: Nimesh.Salike@xjtlu.edu.cn. We thank the managing editor and the anonymous referees for helpful comments and suggestions. Willem Thorbecke is grateful to the Center for International Development at Harvard University for many helpful discussions. Chen Chen and Nimesh Salike acknowledge support from the XJTLU Research Development Fund (RDF-16-02-38). The Asian Development Bank recognizes “China” as the People’s Republic of China.
Publisher Copyright:
© 2021 Asian Development Bank and Asian Development Bank Institute.
PY - 2021/9/1
Y1 - 2021/9/1
N2 - More complex products are less substitutable in international trade and may therefore have lower price elasticities. We investigate this issue using 960 types of manufactured exports from the People’s Republic of China (PRC) to 190 partner economies disaggregated at the Harmonized System 4-digit level. We measure complexity using Hidalgo and Hausmann’s (2009) product complexity index. We find that price elasticities are lower for more complex goods. These results imply that the PRC can reduce its exporters’ exposure to tariffs, trade wars, and exchange rate volatility by upgrading its export basket.
AB - More complex products are less substitutable in international trade and may therefore have lower price elasticities. We investigate this issue using 960 types of manufactured exports from the People’s Republic of China (PRC) to 190 partner economies disaggregated at the Harmonized System 4-digit level. We measure complexity using Hidalgo and Hausmann’s (2009) product complexity index. We find that price elasticities are lower for more complex goods. These results imply that the PRC can reduce its exporters’ exposure to tariffs, trade wars, and exchange rate volatility by upgrading its export basket.
KW - Exchange rate elasticities
KW - PRC exports
KW - Product sophistication
UR - http://www.scopus.com/inward/record.url?scp=85117961772&partnerID=8YFLogxK
U2 - 10.1142/S0116110521500037
DO - 10.1142/S0116110521500037
M3 - Article
AN - SCOPUS:85117961772
SN - 0116-1105
VL - 38
SP - 189
EP - 212
JO - Asian Development Review
JF - Asian Development Review
IS - 2
ER -