An empirical study of the foreign trade balance in China

Wei Weixian

Applied Economics Letters, 1999, vol. 6, issue 8, 485-490

Abstract: The objective of this letter is to investigate the dynamic relationship between China's trade balance (T) and macroeconomic variables: domestic and foreign output (Y and Y*), real exchange rate (E), domestic and foreign money supply (M and M*). The ADF unit root results show that the variables are all integrated of order I(1). The trade balance in China is not cointegrated with a number of variables, including the exchange rate. Absorption, elasticity, and monetary models are compared, and the elastic model performs better. There has been J-curve in China, and the devaluations have had significant effect on the trade balance.

Date: 1999
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DOI: 10.1080/135048599352781

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