The Relationship between RMB Exchange Rate and Chinese Trade Balance: Evidence from a Bootstrap Rolling Window Approach

Junaid Masih, Dongsheng Liu and Javed Pervaiz

International Journal of Economics and Finance, 2018, vol. 10, issue 2, 35-47

Abstract: This study inspects the fundamental relationship between the exchange rate and the trade balance in China. The outcome shows that the real effective exchange rate and trade balance in China has no causal relationship. Though, seeing structural changes in two series, we got the result those both long-run and short-run associations using full-sample data are wobbly, which proposes that the full-sample causation tests can¡¯t be relied upon. Then, using time-varying rolling window method to reexamine the dynamic fundamental relationship. The results show that real effective exchange rate has both negative and positive impacts on the trade balance in several sub-periods, and in turn, trade balance has same impact on real effective exchange rate for China. These findings provide no support for the existence of J-curve effect and Marshall-Lerner Condition in case of China. This study shows that it is impossible to resolve China¡¯s trade deficit, depending only on the movement of RMB¡¯s exchange rate.

Keywords: exchange rate; trade balance; rolling window; bootstrap; time-varying causality (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://ccsenet.org/journal/index.php/ijef/article/view/72070/39922 (application/pdf)
http://ccsenet.org/journal/index.php/ijef/article/view/72070 (text/html)

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:ibn:ijefaa:v:10:y:2018:i:2:p:35-47

Access Statistics for this article

More articles in International Journal of Economics and Finance from Canadian Center of Science and Education Contact information at EDIRC.
Bibliographic data for series maintained by Canadian Center of Science and Education ().