An asymmetric analysis of the J‐curve effect in the commodity trade between China and the US

Mohsen Bahmani‐Oskooee, Niloy Bose and Yun Zhang
Authors registered in the RePEc Author Service: Mohsen Bahmani-Oskooee

The World Economy, 2019, vol. 42, issue 10, 2854-2899

Abstract: This paper follows a non‐linear ARDL error‐correction approach to examine the presence of the J‐curve in the commodity‐level trade between the United States and China. The analysis disaggregates the US–China trade flows by commodities and separately examines the trade balance responses of 97 commodities to the changes in the real yuan–US$ exchange rates. The analysis at the commodity level alleviates potential aggregation bias that is present in earlier studies offering little evidence for long‐run asymmetric effects of exchange rate on the China–US trade balance. We find strong support for short‐run asymmetric effects in the case of two‐third of the commodities, whereas significant long‐run asymmetric effects are present in the case of one‐third of the commodities including those commodities which command large shares in the China–US trade.

Date: 2019
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