Renminbi depreciations and Japan-China commodity trade: do manufactured goods show stronger support for the S-curve?

Mohsen Bahmani-Oskooee, Scott Hegerty and Jia Xu

International Journal of Public Policy, 2011, vol. 7, issue 4/5/6, 250-264

Abstract: Because consumer prices and trade quantities tend to exhibit stronger rigidities than do nominal exchange rates, trade balances usually respond to currency appreciations and depreciations only after a time lag. This dynamic adjustment – depicted as correlations between deviations in a country pair's real exchange rate and their bilateral trade balance – is known as the 'S curve'. In this study, we evaluate this phenomenon for trade between China and Japan in 73 individual industries. We find that 26 of these commodities conform to the S-curve, and that certain categories of manufactures are more likely to do so than are other commodities.

Keywords: S-curve; industry data; China; Japan; renminbi; currency depreciations; money; commodity trade; manufactured goods; consumer prices; trade quantities; commodities; exchange rates; trade balances; currency appreciations; currencies; bilateral trade; public policy. (search for similar items in EconPapers)
Date: 2011
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