Revisiting the Marshall-Lerner Condition under Processing Trade– Empirical Evidence from China
نویسنده
چکیده
With the real exchange rate elasticity of processing net exports being positively related to the processing trade intensity, the modified Marshall-Lerner condition states that a real exchange rate appreciation tends to increase rather than reduce net exports, as long as the composite export elasticity with respect to import via the real exchange rate is sufficiently large. The estimated cointegration relationship of China’s data suggests a robust channel of processing trade through which processing exports increase more than processing imports in response to a real appreciation of Chinese currency vis-à-vis the U.S. dollar.
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