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This paper updates our earlier work (Ahearne, Fernald, Loungani and Schindler, 2003) on whether China, with its huge pool of labor and an allegedly undervalued exchange rate, is hurting the export performance of other emerging market economies in Asia. We continue to find that while exchange rates matter for export performance, the income growth of trading partners matters far more. This suggests the potential for exports of all Asian economies to grow in harmony as long as global growth is strong. We also examine changes in export shares of Asian economies to the U.S. market and find evidence that dramatic changes in shares are taking place. Many of these changes are consistent with a ‘flying geeseߣ pattern in which China moves into the product space vacated by the Asian NIEs or with greater integration of trade across Asia in the production of final goods. Nevertheless, China's dramatic gains in recent years do increase the pressure on Asian economies, particularly in ASEAN and South Asia, to seek areas of comparative advantage. [ABSTRACT FROM AUTHOR]

Do increases in China's exports reduce exports of other emerging Asian economies? We find that correlations between Chinese export growth and that of other emerging Asian economies are actually positive (though usually not significant), even after controlling for trading-partner income growth and real effective exchange rates. We also present results from a VAR estimation of aggregate trade equations on the relative importance of foreign income and exchange rates in determining Asian export growth. Although exchange rates do matter for export performance, the income growth of trading partners matters even more. In addition, we examine specific products and find evidence that a considerable shifting of trade patterns is taking place, consistent with a ‘flying geese’ pattern in which China and ASEAN-4 move into the product space vacated by the NIEs. Our results suggest that China and emerging Asia are both comrades (overall) and competitors (in specific products). [ABSTRACT FROM AUTHOR]

The authors explore features of China's financial system that helped protect it from the crisis, and then try to determine whether China has avoided a crisis or simply deferred it. Pressures generally force rapid adjustment when institutions are insolvent. These mechanisms do not operate fully in China in a market-oriented system. The strength of these external fundamentals would possibly preclude a self-fulfilling country run on China, even in the absence of capital controls. The authors examine why China has performed so well, focusing on aspects of China's financial system that may have helped protect it from a crisis. This working paper can be found at the US Federal Reserve Board's International Finance Discussion Papers. You can access this by going to

The authors of this paper find that on impact, input use falls sharply when technology improves, and output may fall slightly. They construct a measure of aggregate technology change, controlling for imperfect competition, varying utilization of capital and labor, and aggregation effects. Results are consistent with reasonable sticky-price models, which predict the results found. Technology improves, input use generally falls, and output itself typically falls also. With a lag of several years, inputs return to normal and output rises strongly. These results are inconsistent with frictionless dynamic general equilibrium models, which generally predict that technology improvements are expansionary, within puts and output rising immediately. This working paper can be found at the US Federal Reserve Board's International Finance Discussion Papers. You can access this by going to

Some critics have argued that China's devaluation may have contributed to the Asian financial crisis in 1994. The authors of this paper claim that the devaluation was not economically important. More relevant was the exchange rate, as it was a floating rate that was not devalued, and high Chinese inflation has led to a very sharp real appreciation of the currency. There are findings of export competition, that in the period of about 1989 to 1993, China's exchange rate depreciated sharply. In turn, Chinese export growth exceeded that of other Asian economies, and the make up of Asian exports changed significantly. China's economic growth is likely to slow because of increased trade competition as a result of the devaluation of other Asian currencies, and because of reduced capital inflows. This working paper can be found at the US Federal Reserve Board's International Finance Discussion Papers. You can access this by going to

For domestic residents and foreigners, the authors of this paper find that many companies on China's stock markets have separate, restricted classes of shares. Foreigners pay only about one-quarter the price paid by domestic residents, though these shares are identical other than who can own them. Differences displayed in expected rates of return by foreign and domestic investors can account for the generally higher level and volatility of prices for domestic shares relative to foreign shares. Foreigners pay a lower relative price for companies with a higher proportion owned by the state reflecting a higher price paid by both foreigners and domestic residents. The authors explore various company characteristics and explain cross-company differences in the relative price paid by foreigners.This working paper can be found at the US Federal Reserve Board's International Finance Discussion Papers. You can access this by going to

Aggregate productivity and aggregate technology are meaningful but distinct concepts. When productivity and technology differ because of imperfect competition, we show that productivity residual measures change economic welfare. The authors present an accounting framework that distinguishes several new non-technological gaps between productivity and technology. These gaps reflect imperfections and frictions in output and factor markets. This working paper can be found at the US Federal Reserve Board's International Finance Discussion Papers. You can access this by going to

Infrastructure and productivity are positively correlated in the United States and other countries at a macroeconomic level. This paper explores the interpretation of this correlation by focusing on roads, being the largest component of public capital. The author focuses on roads and finds that vehicle-intensive industries benefit disproportionately from road building. When road growth changes productivity growth changes more in industries that are more vehicle intensive. This paper finds that congestion significantly affects road services at the margin, although congestion does not appear important before 1973. If roads are productive, then industries that use roads intensively should benefit more. This working paper can be found at the US Federal Reserve Board's International Finance Discussion Papers. You can access this by going to

The authors of this paper address a typical two-digit industry in the United States that appears to have constant returns to scale. Estimates tend to rise at higher levels of aggregation. In addition, estimates using value added differ substantially from those using gross output, and appear less healthy. These findings are consistent with stories of aggregation over heterogeneous units, but inconsistent with a representative firm model. The authors study implications of this heterogeneity for recent models of damaged competition in macroeconomics. This working paper can be found at the US Federal Reserve Board's International Finance Discussion Papers. You can access this by going to