nep-cna New Economics Papers
on China
Issue of 2008‒10‒07
six papers chosen by
Zheng Fang
Ohio State University

  1. Trade, product variety and welfare: a quantitative assessment for mainland China By Ralf Ruhwedel; Michael Funke
  2. The great proletarian cultural revolution, disruptions to education, and returns to schooling in urban China By Giles, John; Park, Albert; Wang, Meiyan
  3. Globalization and Inflation: The Role of China By Denise Côté; Carlos de Resende
  4. Volatility Transmission between Renminbi and Asia-Pacific on-shore and off-shore U.S. dollar futures By Roberta Colavecchio; Michael Funke
  5. The undisclosed Renminbi Basket: are the markets telling us something about where the Renminbi - US Dollar Exchange Rate is going? By Marc Gronwald; Michael Funke
  6. Trading with Asia's Giants By Barry Bosworth; Susan M. Collins; Aaron Flaaen

  1. By: Ralf Ruhwedel; Michael Funke
    Abstract: We calculate a variety of welfare gains for Mainland China, following the approach of Romer (1994), who emphasized that proper modelling of the impact of trade restrictions on the number of available product varieties is crucial for quantifying the welfare impact of trade liberalization. The empirical work presented relies on direct measures of product variety calculated from highly disaggregated trade data. The emerging conclusion is that freer trade has indeed boosted welfare.
    Keywords: trade liberalization; product variety; welfare; China
    Date: 2008–06
  2. By: Giles, John; Park, Albert; Wang, Meiyan
    Abstract: In determining whether a country's higher education system should be expanded, it is important for policymakers first to determine the extent to which high private returns to post-secondary education are an indication of the scarcity of graduates instead of the high unobserved ability of students who choose to attend post-secondary education. To this end, the paper identifies the returns to schooling in urban China using individual-level variation in educational attainment caused by exogenous city-wide disruptions to education during the Cultural Revolution from 1966 to 1976. For city-cohorts who experienced greater disruptions, children's educational attainment became less correlated with that of their fathers and more influenced by whether their fathers held administrative positions. The analysis calculates returns to college education using data from the China Urban Labor Survey conducted in five large cities in 2001. The results are consistent with the selection of high-ability students into higher education. The analysis also demonstrates that these results are unlikely to be driven by sample selection bias associated with migration, or by alternative pathways through which the Cultural Revolution could have affected adult productivity.
    Keywords: Education For All,Tertiary Education,Secondary Education,Primary Education,Population Policies
    Date: 2008–09–01
  3. By: Denise Côté; Carlos de Resende
    Abstract: In this paper, we develop a theoretical model which identifies four channels-import prices, competition with domestic suppliers and workers, and commodity prices-through which priceand wage-setting conditions in country j may affect inflation in country i. We estimate a dynamic inflation equation derived from the theoretical model using a quarterly dataset of eighteen OECD countries over the 1984-2006 period. Although our methodology can be applied to any pair of countries, we focus on the effect of China on the inflation rate of other countries. Our results suggest that while China's negative effect on global inflation has been quantitatively modest, it has increased in absolute terms since the early 2000s. We also find evidence that, for most countries examined, competition with domestic suppliers has been the most important channel.
    Keywords: International topics
    JEL: E22 E32 E44
    Date: 2008
  4. By: Roberta Colavecchio; Michael Funke
    Abstract: This paper uses multivariate GARCH techniques to study volatility spillovers between the Chinese non-deliverable forward market and seven of its Asia-Pacific counterparts over the period January 1998 to March 2005. To account for the time-variability of conditional correlation, a dynamic correlation structure is included in the volatility model specification. The empirical results demonstrate that the renminbi non-deliverable forward (NDF) has been a driver of various Asian currency markets but that such co-movements exhibit a substantial degree of heterogeneity. As to the determinants of the magnitude of these co-movements, we test the relevance of potential factors and find that it is the degree of real and financial integration, in particular, that exerts the largest influence on volatility transmission.
    Keywords: China, renminbi, Asia, forward exchange rates, non-deliverable forward market, multivariate GARCH models
    JEL: C22 F31 F36
    Date: 2008–03
  5. By: Marc Gronwald; Michael Funke
    Abstract: On 21 July 2005 China adopted an undisclosed basket exchange rate regime. We formally assess and envisage the gradual evolution of the renminbi over time. We utilize nonlinear dependencies in the renminbi exchange rate and describe the smooth transition of the renminbi/U.S. dollar (RMB/USD) exchange rate using the family of time-varying autoregressive (TV-AR) models. Specifically, the nonlinear models allow for a smooth transition from one optimal level to another. Our estimation results imply that the RMB/USD exchange rate will likely be about 7.10 RMB/USD in summer/autumn 2009.
    Keywords: China, renminbi, de facto exchange rate regime, TV-AR model, TV-AR-GARCH model
    JEL: C22 F31 F37
    Date: 2008–04
  6. By: Barry Bosworth (Indian Council for Research on International Economic Rela); Susan M. Collins (Indian Council for Research on International Economic Rela); Aaron Flaaen (Indian Council for Research on International Economic Rela)
    Abstract: The United States' large and sustained trade deficit with Asia raises concerns in the United States about its competitiveness in the region. The purpose of this paper is to examine the patterns of U.S. trade relationships with China and India, and the factors that are influencing their evolution. In contrast to the current public policy debate, the discussion largely addresses how these two economies compare as markets for U.S. exporters. This paper begins by noting that U.S. exports to both countries do appear low relative to the performance of Japan and the EU-15. We examine potential explanations for the weak exports from three different perspectives. First, we analyze the composition of U.S. exports to these economies, and consider how this mix of products compares to those which it appears to be competitive in exporting to the rest of the world. Second, we examine the role of multinational corporations in facilitating the trade flows between the U.S and these two economies. Finally, we employ the use of "gravity equations" to examine the bilateral trade patterns while controlling for a variety of countryspecific characteristics, such as distance. In this context, we are also able to analyze the pattern of trade in services as well as the more traditional focus on goods trade.
    Keywords: China, India, United States, trade, and exports
    JEL: F14 F23

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