The Impact of the Chinese Renminbi on the Exports of the ROK and Japan to the US (ROK Economic System Series No.10)

Saang Joon Baak ()
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Saang Joon Baak: Waseda University

No 0604e, Discussion papers from ERINA - Economic Research Institute for Northeast Asia

Abstract: This paper examines the impact of the real exchange rate of the Chinese renminbi against the US dollar on Japanese and South Korean exports to the US. Empirical test results analyzing quarterly data covering 1986Q1 to 2005Q2 show different long-run impacts of the renminbi in the export functions of the two countries. In particular, according to estimates of cointegrating vectors, the depreciation of the renminbi has a positive impact on Japanese exports but a negative impact on South Korean exports. However, some stability tests indicate a structural break in export functions. Unlike in the case of the estimate for the whole sample period, in empirical tests with recent sub-period data, the depreciation of the Chinese renminbi turns out to have a positive impact on both Japanese and South Korean exports. In addition, it transpires that the real GDP of the US has a positive impact on the exports of the two countries. The exchange rate volatility of the Korean won has a negative impact on South Korean exports but a positive impact on Japanese exports. The short-run dynamics examined using error correction models show similar impacts on the part of the explanatory variables.

Keywords: Japanese exports; South Korean exports; Chinese renminbi; cointegration; error correction model; structural break (search for similar items in EconPapers)
JEL-codes: C2 F1 F3 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2006-11
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