The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
China's sectoral trade composition, product quality mix, and import content of processing exports have all changed substantially during the past decade. This has rendered trade elasticities estimated using aggregate data highly unstable, with more recent data pointing to significantly higher demand and price elasticities. Sectoral differences in these parameters are also very wide. All this suggests greater caution in using historical data to simulate the response of the China's economy to external shocks and exchange rate changes. Analyses based on models whose estimated coefficients largely reflect the China of the 1980s and 1990s are likely to turn out to be wrong, perhaps even dramatically.