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The Role Of Exchange Rate In Sino‐U.S. Bilateral Trade

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  • WON W. KOO
  • RENAN ZHUANG

Abstract

We use the error component two‐stage least squares estimation method to examine the effects of the Sino‐U.S. exchange rate and the weighted exchange rate between the United States and other Asian countries on the Sino‐U.S. trade patterns. Our study suggests that both the exchange rates have contributed to China’s increased trade surplus with the United States. China has imported intermediate goods from the Asian countries, produced final goods using its cheap labor, and exported those goods to the United States. This is especially true for bilateral trade of high‐tech manufacturing goods. Our study also reveals that the U.S. bilateral trade balance could improve if China appreciates its currency (Yuan) against the U.S. dollar. (JEL F14, F10, F19)

Suggested Citation

  • Won W. Koo & Renan Zhuang, 2007. "The Role Of Exchange Rate In Sino‐U.S. Bilateral Trade," Contemporary Economic Policy, Western Economic Association International, vol. 25(3), pages 362-373, July.
    • Handle: RePEc:bla:coecpo:v:25:y:2007:i:3:p:362-373
    DOI: 10.1111/j.1465-7287.2006.00046.x
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    References listed on IDEAS

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    Cited by:

    1. Omoshoro-Jones, Oyeyinka S. & Bonga-Bonga, Lumengo, 2021. "Global imbalances, external adjustment and propagated shocks: An African perspective from a global VAR model," International Economics, Elsevier, vol. 165(C), pages 186-203.
    2. Walter, Jason & Baek, Jungho & Koo, Won W., 2012. "International trade and macroeconomic dynamics: The case of U.S. bilateral trade with G-7 countries," Research in Economics, Elsevier, vol. 66(4), pages 398-405.
    3. Hong, Chang & Liefert, William M. & Wang, Sun Ling, 2017. "Exchange Rates, Income Growth, and Chinese Agricultural Imports," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258447, Agricultural and Applied Economics Association.
    4. Yi‐Bin Chiu & Chia‐Hung Sun, 2009. "Economic interdependence and bilateral trade imbalance across the Taiwan Strait," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 36(4), pages 411-432, September.
    5. Stephen Devadoss & Amy Hilland & Ron Mittelhammer & John Foltz, 2014. "The effects of the Yuan-dollar exchange rate on agricultural commodity trade between the United States, China, and their competitors," Agricultural Economics, International Association of Agricultural Economists, vol. 45(S1), pages 23-37, November.
    6. Biswajit Banerjee & Haiyan Shi & Jan Radovan & Yingying Sheng & Xin Li, 2017. "The Impact of the Exchange Rate and Trade Composition on China’s Trade Balance Vis-à-Vis Selected Partner Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(3), pages 311-344, September.

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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F10 - International Economics - - Trade - - - General
    • F19 - International Economics - - Trade - - - Other

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