Tariff and exchange rate pass-through for Chinese exports: A firm-level analysis across customs regimes |
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| Institution: | 1. Department of Economics, Sonoma State University, 1801 E. Cotati Avenue, Rohnert Park, CA 94928, USA;2. School of Business Administration, University of San Diego, 5998 Alcala Park, San Diego, CA 92110, USA;3. Department of International Business, HEC Montréal, 3000 chemin de la Côte-Sainte-Catherine, Montréal, QC H3T2A7, Canada;1. KDI School of Public Policy and Management, 263 Nansejong-ro, Sejong, Republic of Korea;2. Department of Economics, Dalhousie University, 6214 University Avenue, Halifax, NS, Canada;1. Collaborative Innovation Center for the Cooperation and Development of Hong Kong, Macao and Mainland China, Sun Yat-Sen University, Guangzhou, Guangdong 510275, China;2. Department of Economics, Western Michigan University, Kalamazoo, MI 49008-5330, United States;3. School of Economics, Zhongnan University of Economics and Law, Wuhan, Hubei 430073, China |
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| Abstract: | We examine whether a firm's import content share differentially affects the degree of tariff and exchange rate pass-through into its export prices. Our pricing-to-market model suggests that a firm's import content share negatively affects the degree of exchange rate pass-through but does not affect the degree of tariff pass-through. Using firm-level data for Chinese exporting firms during the period 2000–2006, we find evidence of an almost complete exchange rate pass-through. As expected, when we distinguish firms by their trade regime, processing-trade firms, especially pure-assembly firms which tend to have higher import-content share, have a lower exchange rate pass-through than ordinary trade firms. We find no evidence that the tariff pass-through differs across the various trade regimes. |
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