Dynamics of the China-United Kingdom Commodity Trade

Mohsen Bahmani-Oskooee and Ruixin Zhang

Chinese Economy, 2014, vol. 47, issue 2, 75-93

Abstract: The S-curve phenomenon postulates that while past values of the trade balance and current exchange rates are negatively correlated, future values of the trade balance and current exchange rates are positively correlated. We investigated this pattern between China and the United Kingdom. When we use the bilateral trade flows between the two countries, we find no support for the S-curve. However, when we disaggregate the bilateral trade data by industry and construct the S-curve for 47 industries that trade between the two countries, we find support for the S-curve in 12 cases. These 12 industries, which conduct 30 percent of the trade (including the largest industry), could benefit from currency depreciation.

Date: 2014
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