Thesis on Exchange Rate and Trade Reforms

Abstract

This thesis is composed of two essays on exchange rate reform and one essay on trade reform in China. The first chapter revisits the exchange rate disconnect puzzle by using monthly data and exploiting the unexpected exchange rate reform in China, as a natural experiment. A difference-in-differences estimation uncovers a negative and statistically significant effect of a currency appreciation on exports. The second chapter studies whether currency appreciation causes export upgrading, an important factor for economic development. This chapter shows China?s export structure became more similar to that of the developed countries after the currency appreciation. The third chapter investigates whether trade liberalization mitigates domestic political distortion. By studying China?s WTO accession, this paper empirically shows trade liberalization leads to the reallocation of market shares from politically favored but less productive firms to more productive ones.