Tariff and exchange rate pass-through for Chinese exports: A firm-level analysis across customs regimes

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China Economic Review, ISSN: 1043-951X, Vol: 46, Page: 87-96

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Florence Bouvet; Alyson C. Ma; Ari Van Assche
Elsevier BV
Economics, Econometrics and Finance
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article description
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.