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S-Curve dynamics of trade between U.S. and China

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  • Bahmani-Oskooee, Mohsen
  • Ratha, Artatrana

Abstract

A newly emerging area in international economics looks at the cross-correlation coefficient between past and future values of the trade balance and movement in the current exchange rate as a way of analyzing the response of the trade balance to exchange rate changes. Since the cross-correlation function follows a symmetric pattern, it comes under the heading of the S-Curve. Previous studies have considered the experience of developed and developing countries with the S-Curve, excluding China. In this paper we consider the Chinese experience. We show that when aggregate trade data between China and the U.S. are considered, there is no evidence of the S-Curve. However, when the data are disaggregated by commodity, the S-Curve is supported in almost 50% of the close to 100 industries considered. Furthermore, it appears that commodity types do not have any influence in determining the existence of an S-Curve pattern.

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Bibliographic Info

Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 21 (2010)
Issue (Month): 2 (June)
Pages: 212-223

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Handle: RePEc:eee:chieco:v:21:y:2010:i:2:p:212-223

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Web page: http://www.elsevier.com/locate/chieco

Related research

Keywords: S-Curve Commodity trade China U.S.;

References

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  1. Senhadji, Abdelhak S., 1998. "Dynamics of the trade balance and the terms of trade in LDCs: The S-curve," Journal of International Economics, Elsevier, vol. 46(1), pages 105-131, October.
  2. Mohsen Bahmani-Oskooee & Ruixin Zhang, 2013. "The J-curve: evidence from commodity trade between UK and China," Applied Economics, Taylor & Francis Journals, vol. 45(31), pages 4369-4378, November.
  3. Bahmani-Oskooee, Mohsen, 1985. "Devaluation and the J-Curve: Some Evidence from LDCs," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 500-504, August.
  4. Mohsen Bahmani-Oskooee & Artatrana Ratha, 2004. "The J-curve dynamics of U.S. bilateral trade," Journal of Economics and Finance, Springer, vol. 28(1), pages 32-38, March.
  5. Bahmani-Oskooee, Mohsen & Ratha, Artarana, 2007. "Bilateral S-curve between Japan and her trading partners," Japan and the World Economy, Elsevier, vol. 19(4), pages 483-489, December.
  6. Wei Weixian, 1999. "An empirical study of the foreign trade balance in China," Applied Economics Letters, Taylor & Francis Journals, vol. 6(8), pages 485-490.
  7. Zhang, Zhaoyong, 1998. "Does Devaluation of the Renminbi Improve China’s Balance of Trade?," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 51(3), pages 437-445.
  8. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, vol. 84(1), pages 84-103, March.
  9. Mohsen Bahmani-Oskooee & Artatrana Ratha, 2004. "The J-Curve: a literature review," Applied Economics, Taylor & Francis Journals, vol. 36(13), pages 1377-1398.
  10. Brada, Josef C & Kutan, Ali M & Zhou, Su, 1993. " China's Exchange Rate and the Balance of Trade," Economic Change and Restructuring, Springer, vol. 26(3), pages 229-42.
  11. Paresh Kumar Narayan, 2006. "Examining the relationship between trade balance and exchange rate: the case of China's trade with the USA," Applied Economics Letters, Taylor & Francis Journals, vol. 13(8), pages 507-510.
  12. Stephen P. Magee, 1973. "Currency Contracts, Pass-Through, and Devaluation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1), pages 303-325.
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Citations

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Cited by:
  1. Amit Ghosh, 2012. "Is there an S-curve relationship between U.S. trade balance and terms of trade? An analysis across industries and countries," Economics Bulletin, AccessEcon, vol. 32(1), pages 325-337.
  2. Mohsen Bahmani-Oskooee & Dan Xi, 2012. "China-Germany commodity trade and the S-curve," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 5(1), pages 20-28, February.
  3. 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.
  4. Abdurrahman Korkmaz & Sabiha Korkmaz, 2013. "An alternative consideration for the testing procedure of the S-curve hypothesis," Empirical Economics, Springer, vol. 45(1), pages 627-634, August.
  5. Mohsen Bahmani-oskooee & Hadise Fariditavana, 2014. "Do Exchange Rate Changes have Symmetric Effect on the S-Curve?," Economics Bulletin, AccessEcon, vol. 34(1), pages 164-173.

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