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United States-China Trade At The Commodity Level And The Yuan-Dollar Exchange Rate

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  • MOHSEN BAHMANI-OSKOOEE
  • YONGQING WANG

Abstract

"In 1978 when China began her economic reforms of moving toward a free market economy and trade liberalization, the trade balance between China and the United States was in favor of the United States in the magnitude of 600 million dollars. Over the 1978-2002 period, however, it has changed in favor of China such that in 2002 China had a surplus of 120 billion dollars against the United States. Over the same period, the Chinese yuan has depreciated almost fourfold. Is real depreciation of the yuan against the dollar a factor in the trade between the two countries? In this article, we employ data at the industry level (88 two- and three-digit industries) and recent advances in error-correction modeling to show that indeed the real yuan-dollar rate has played a significant role. This contradicts most previous research that used trade data at the aggregate level." ("JEL" F31, F32, F14) Copyright 2007 Western Economic Association International.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Contemporary Economic Policy.

Volume (Year): 25 (2007)
Issue (Month): 3 (07)
Pages: 341-361

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Handle: RePEc:bla:coecpo:v:25:y:2007:i:3:p:341-361

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Cited by:
  1. Wang, Chun-Hsuan & Lin, Chun-Hung A. & Yang, Chih-Hai, 2012. "Short-run and long-run effects of exchange rate change on trade balance: Evidence from China and its trading partners," Japan and the World Economy, Elsevier, vol. 24(4), pages 266-273.
  2. Enzo Cassino & David Oxley, 2013. "How Does the Exchange Rate Affect the Real Economy? A Literature Survey," Treasury Working Paper Series 13/26, New Zealand Treasury.
  3. Pomfret, Richard & Pontines, Victor, 2013. "Exchange Rate Policy and Regional Trade Agreements: A Case of Conflicted Interests?," ADBI Working Papers 436, Asian Development Bank Institute.
  4. Bhattarai, Keshab & Mallick, Sushanta, 2013. "Impact of China's currency valuation and labour cost on the US in a trade and exchange rate model," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 40-59.

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