Responsiveness of U.S.-China Trade Flows to Relative Prices and Nominal Exchange Rate

Yongqing Wang

Chinese Economy, 2020, vol. 53, issue 1, 121-132

Abstract: Most previous research did not find powerful evidence suggesting the depreciation of Chinese yuan had contributed significantly to the trade imbalances between the United States and China. In our current study, we employ quarterly data from 2005Q3 to 2018Q3 and an error correction model to examine the responsiveness of bilateral trade flows between the United States and China to relative prices and the nominal exchange rate under China’s managed floating exchange rate regime. To test for a possible structural break due to the financial crisis in 2008, we carry out Chow tests. But the results support no structural break. We find strong evidence that depreciation of Chinese currency yuan encourages U.S. imports from China and discourages U.S. exports to China. In addition, an increase in U.S. income will promote U.S. imports from China significantly, and a higher Chinese income will remarkably encourage U.S. exports to China. Finally, the bilateral trade flows between the United States and China respond differently to the relative prices and nominal exchange rate.

Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10971475.2019.1625520 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:chinec:v:53:y:2020:i:1:p:121-132

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MCES20

DOI: 10.1080/10971475.2019.1625520

Access Statistics for this article

More articles in Chinese Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().