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Builds a model of two types of Chinese exports, those processed and assembled from imported inputs ("processed" exports (PE)) and "non-processed" exports (NPE). When the source of the increase in the Chinese real exchange rate (CRER) is appreciation against the currencies of other emerging Asian trading partners, the effect on PE is positive but insignificant, while the effect on NPE is negative. By contrast, when the source of the increase in the CRER is appreciation against China's advanced-economy trading partners, the effects on both types of exports are negative. Thus greater exchange rate flexibility could contribute to lowering China's trade surplus through restraining growth of exports. Illustrations. A print on demand report.
We assess the importance of economic fundamentals in the transmission of international shocks to financial markets in various emerging market economies (EMEs), covering the so-called taper-tantrum episode of 2013 and seven other episodes of severe EME-wide financial stress since the mid-1990s. Cross-country regressions lead us to the following results: (1) EMEs with relatively better economic fundamentals suffered less deterioration in financial markets during the 2013 taper-tantrum episode. (2) Differentiation among EMEs set in relatively early and persisted through this episode. (3) During the taper tantrum, while controlling for the EMEs' economic fundamentals, financial conditions also d...