Abstract
This paper applies a panel structural VAR model to uncover both the dynamics and inter-product/market differences in responses of product quality to real exchange rate (RER) shocks with complete data of China’s monthly agricultural exports. It finds that RER appreciations promote the quality of China’s agricultural exports on average in contrast to discouraging exports, but the effect is mostly short-run—the average response peaks in the immediate month after the shock and phases out in three months. Following domestic price and quality itself, RER shocks account for 3% on average in quality variations as the third contributor. The quality response to RER shocks, however, substantially differs across both products and markets.
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