John W. Schindler

Exchange-Rate Effects on China's Trade

Though Chinas share of world trade exceeds that of Japan, little is known about the response of Chinas trade to changes in exchange rates. The few estimates available have two limitations. First, the data for trade prices are based on proxies for prices from other countries. Secondly, the estimation sample includes the period of Chinas transformation from a centrally-planned economy to a more market-oriented one. We address these limitations with an empirical model explaining the shares of Chinas exports and imports in world trade in terms of the real effective value of the renminbi. The specifications control for foreign direct investment and for the role of imports of parts to assemble exports. Parameter estimation uses disaggregated monthly trade data and excludes Chinas decentralization period. We find that a 10 percent real appreciation of the renminbi lowers the share of aggregate Chinese exports by nearly one percentage point. However, the estimated response of imports is negligible and lacks precision.

The Impact of Chinese Exports on Global Import Prices

This paper evaluates the evidence bearing on the question of whether Chinas buoyant export growth has led to significant changes in the import prices, and thus inflation performance, of its trading partners. This evidence suggests that the impact of Chinese exports on global import prices has been, while non- negligible, fairly modest. We identify a statistically significant effect of US imports from China on US import prices, but given the size of this effect and the relatively low share of imports in US GDP, the ultimate impact on US consumer prices has likely been quite small. Moreover, imports from China had little apparent effect on US producer prices. Finally, using a multi-country database of trade transactions, we estimate that, since 1993, Chinese exports lowered annual import inflation in a large set of economies by 0.25 percentage point or less on average.

Is China "exporting deflation"?

In the past few years, observers increasingly have pointed to China as a source of downward pressure on global prices. This paper evaluates the theoretical and empirical evidence bearing on the question of whether Chinas buoyant export growth has led to significant changes in the inflation performance of its trading partners. This evidence suggests that the impact of Chinese exports on global prices has been, while non-negligible, fairly modest. On a priori grounds, our theoretical analysis suggests that Chinas economy is still too small relative to the world economy to have much effect on global inflation: a back-of-the-envelope calculation puts that effect at about 1/3 percentage point in recent years. In terms of the empirical evidence, we identify a statistically significant effect of U.S. imports from China on U.S. import prices, but given the size of this effect and the relatively low share of imports in U.S. GDP, the ultimate impact on the U.S. consumer prices has likely been quite small. Moreover, imports from China had little apparent effect on U.S. producer prices. Finally, using a multi-country database of trade transactions, we estimate that since 1993, Chinese exports lowered annual import inflation in a large set of economies by 1/4 percentage point or less on average, similar to the prediction of our theoretical model.

Exchange-rate effects on China's trade: an interim report

Though Chinas share of world trade is comparable to that of Japan, little is known about the response of Chinas trade to changes in exchange rates. The few estimates available suffer from two limitations. First, the data for trade prices are based on proxies for prices from other countries. Second, the estimation sample includes the period of Chinas transformation from a centrally-planned economy to a market-oriented system. To address these limitations, this paper develops an empirical model explaining the shares of Chinas exports and imports in world trade in terms of the real effective value of the renminbi. The specifications control for foreign direct investment and for the role of imports of parts to assemble merchandise exports. Parameter estimation uses disaggregated monthly trade data and excludes the period during which most of Chinas decentralization occurred. The estimation results suggest that a ten-percent real appreciation of the renminbi lowers the share of aggregate Chinese exports by a half of a percentage point. The same appreciation lowers the share of aggregate imports by about a tenth of a percentage point.

Assessing and Combining Financial Conditions Indexes

We evaluate the short horizon predictive ability of financial conditions indexes for stock returns and macroeconomic variables. We find reliable predictability only when the sample includes the 2008 financial crisis, and we argue that this result is driven by tailoring the indexes to the crisis and by non-synchronous trading. Financial conditions indexes are based on a variety of constituent variables and aggregation methods, and we discuss a simple procedure for consolidating the growing number of different indexes into a single proxy for financial conditions.

Testing Optimality in Job Search Models

This paper uses Bayesian techniques to compare three definitions of optimality for the basic job search model: the standard income-maximizing definition, an approximation to the standard definition, and a simple alternative. The important role of prior choice in these comparisons is illustrated. Using natural conjugate priors to represent hypothetical samples of data, we find that the simple alternative is preferred to the standard definition of optimality. However, using priors constructed from findings in the literature, we are able to find some evidence in favor of the standard definition of optimality.