Mishra, PrachiSubramanian, ArvindMattoo, Aaditya2012-03-192012-03-192012-03-01https://hdl.handle.net/10986/3278This paper estimates how changes in China's exchange rates would affect exports from competitor countries in third-country markets -- in other words, the "spillover effect." The authors use recent theory to develop an identification strategy, with a key role for the competition between China and its developing country competitors in specific products and export destinations. Using disaggregated trade data, they estimate the spillover effect by exploiting the variation across different exporters, importers, products, and time periods. They find a spillover effect that is statistically and quantitatively significant. Their estimates suggest that a 10-percent appreciation of China's real exchange rate boosts a developing country's exports of a typical four-digit Harmonized System product category to third markets by about 1.5 to 2 percent on average. The magnitude of the spillover effect varies systematically with the characteristics of products, such as the extent to which they are differentiated.CC BY 3.0 IGOABSOLUTE VALUEALTERNATIVE EXCHANGE RATEBENCHMARKINGBILATERAL EXCHANGE RATEBILATERAL TRADEBUSINESS CYCLECHECKSCOMPETITIVE ADVANTAGECOMPETITIVE DEVALUATIONSCOMPETITIVENESSCONSUMERSCORRELATION COEFFICIENTCORRELATION COEFFICIENTSCOUNTRY FIXED EFFECTSCOUNTRY MARKETCOUNTRY MARKETSCOUNTRY OF ORIGINCOUNTRY TO COUNTRYCURRENCYCURRENCY UNIONSDEFLATORSDEPENDENT VARIABLEDEPRECIATIONDEPRECIATIONSDEPRESSIONDEVALUATIONSDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPMENT ECONOMICSDEVELOPMENT POLICYDIFFERENT CURRENCIESDOLLAR EXCHANGE RATEDOMESTIC INFLATIONDOMESTIC PRICEDOMESTIC PRICESECONOMETRIC ESTIMATESECONOMIC GROWTHEFFECT OF EXCHANGE RATE CHANGESEFFECTIVE EXCHANGE RATEEFFECTIVE EXCHANGE RATESELASTICITYELASTICITY OF DEMANDELASTICITY OF EXPORTSELASTICITY OF SUBSTITUTIONESTIMATION STRATEGYEXCESS CAPACITYEXCHANGE RATE DATAEXCHANGE RATE FLUCTUATIONSEXCHANGE RATE MOVEMENTSEXCHANGE RATE PEGSEXCHANGE RATE POLICIESEXCHANGE RATE POLICYEXCHANGE RATESEXPENDITUREEXPORT PERFORMANCEEXPORTEREXPORTERSEXPORTSFEDERAL RESERVEFEDERAL RESERVE BANKFIRM PERFORMANCEFIXED SHAREFOREIGN FIRMSFOREIGN TRADEGDPGLOBALIZATIONHUMAN RESOURCESIMPORTIMPORT DEMANDIMPORT PRICESIMPORTSINCOMEINDUSTRIAL COUNTRIESINFLATIONINTANGIBLEINTERMEDIATE GOODSINTERNATIONAL BANKINTERNATIONAL ECONOMICSINTERNATIONAL FINANCEINTERNATIONAL FINANCIAL MARKETSINTERNATIONAL FINANCIAL STATISTICSINTERNATIONAL MACROECONOMICSINTERNATIONAL TRADELIFE EXPECTANCYMACROECONOMIC VARIABLEMACROECONOMICSMANUFACTURING INDUSTRIESMARKET ENTRYMARKET ENTRY COSTSMARKET EXCHANGE RATESMARKET VALUATIONSMIDDLE INCOME COUNTRIESMONETARY FUNDMULTILATERAL EXCHANGE RATENOMINAL BILATERAL EXCHANGE RATENOMINAL EXCHANGE RATEOTHER CURRENCIESOUTPUTPOLITICAL ECONOMYPOSITIVE COEFFICIENTPOWER PARITYPRICE INDEXPRICE INDICESPRICE LEVELPURCHASINGPURCHASING POWERPURCHASING POWER PARITYREAL EFFECTIVE EXCHANGE RATEREAL EFFECTIVE EXCHANGE RATESREAL EXCHANGE RATEREAL EXCHANGE RATESREAL EXPORTSREGIONAL DUMMIESRELATIVE PRICEREVALUATIONROBUSTNESS CHECKSSAVINGSSAVINGS MOTIVESAVINGS RATESSTANDARD DEVIATIONSTOCK MARKETSTOCK PRICESSUPPLY CONDITIONSTHIRD MARKETTHIRD MARKETSTOTAL EXPORTSTOTAL IMPORTSTRADE AGREEMENTSTRADE DATATRADE POLICIESTRANSMISSION MECHANISMUNEMPLOYMENTVALUATIONSVALUE ADDEDWEIGHTSWorld Bank10.1596/1813-9450-5989