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The S-Curve: China versus Its Major Trading Partners

Mohsen Bahmani-Oskooee () and Ruixin Zhang
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Ruixin Zhang: Department of Economics, University of Wisconsin-Milwaukee, Milwaukee, WI 53201, USA

Frontiers of Economics in China, 2013, vol. 8, issue 4, 467-475

Abstract: China has been accused of manipulating its currency to gain international competitiveness and enjoy a trade surplus. The S-Curve is a hypothesis that could be used to test the effectiveness of currency devaluation or depreciation. It claims that while future values of the trade balance and current exchange rate are positively correlated, the past values of the trade balance and current exchange rate are negatively correlated. While China¡¯s aggregate trade flows with the rest of the world conforms to the S-Curve hypothesis, disaggregating trade flows by trading partner reveals that not all partners are affected equally by devaluation. Indeed, trade with 8 out of the 24 partners does not support the S-Curve hypothesis.

Keywords: S-Curve; China; trading partners; bilateral trade (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2013
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