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The S-Curve: China versus Its Major Trading Partners

Author

Listed:
  • Mohsen Bahmani-Oskooee

    (The Center for Research on International Economics and Department of Economics, University of Wisconsin-Milwaukee, Milwaukee, WI 53201, USA)

  • Ruixin Zhang

    (Department of Economics, University of Wisconsin-Milwaukee, Milwaukee, WI 53201, USA)

Abstract

China has been accused of manipulating its currency to gain international competitiveness and enjoy a trade surplus. The S-Curve is a hypothesis that could be used to test the effectiveness of currency devaluation or depreciation. It claims that while future values of the trade balance and current exchange rate are positively correlated, the past values of the trade balance and current exchange rate are negatively correlated. While China¡¯s aggregate trade flows with the rest of the world conforms to the S-Curve hypothesis, disaggregating trade flows by trading partner reveals that not all partners are affected equally by devaluation. Indeed, trade with 8 out of the 24 partners does not support the S-Curve hypothesis.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Ruixin Zhang, 2013. "The S-Curve: China versus Its Major Trading Partners," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 8(4), pages 467-475, December.
    • Handle: RePEc:fec:journl:v:8:y:2013:i:4:p:467-475
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-002-013-0023-1
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    Cited by:

    1. Dene T. Hurley & Nikolaos Papanikolaou, 2018. "An Investigation of China‐U.S. Bilateral Trade and Exchange Rate Changes Using the Autoregressive Distributed Lag Model," Economic Papers, The Economic Society of Australia, vol. 37(2), pages 162-179, June.

    More about this item

    Keywords

    S-Curve; China; trading partners; bilateral trade;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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