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The effects of the Yuan-dollar exchange rate on agricultural commodity trade between the United States, China, and their competitors

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  • Stephen Devadoss
  • Amy Hilland
  • Ron Mittelhammer
  • John Foltz

Abstract

The United States claims that the undervaluation of Chinese currency, the Yuan, causes U.S. exports to China to decrease and imports from China to increase. Furthermore, because the Yuan is undervalued only against the dollar, U.S. competitors have an advantage in exporting to China and China has an advantage over its competitors in exporting to the United States. This study develops a theoretical model to analyze the effect of the Yuan undervaluation on prices, supply, demand, and trade in the United States, China, and their competitors. This study applies a cointegration/error-correction model to empirically quantify the short-run and long-run effects of the devaluation of the Yuan on important agricultural commodities traded between the United States, China, and their competitors. These commodities include Chinese imports of milk, soybeans, and cotton from the United States and U.S. imports of beans, fruit juice, and fruit from China. The results show that Yuan devaluation causes Chinese imports of U.S. milk, soybeans, and cotton to decline and U.S. imports of beans, fruit juice, and fruit from China to increase in the short run and in the long run.

Suggested Citation

  • 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.
  • Handle: RePEc:bla:agecon:v:45:y:2014:i:s1:p:23-37
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    File URL: http://hdl.handle.net/10.1111/agec.12127
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    References listed on IDEAS

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    Cited by:

    1. Stephen Devadoss & William Ridley, 2014. "Effects of the Mexican Apple Tariff on the World Apple Market," Review of Development Economics, Wiley Blackwell, vol. 18(4), pages 763-777, November.
    2. Mourad Zmami & Ousama Ben-Salha, 2015. "The adjustment of plant-level investment to exchange rate fluctuations in Tunisia: do the size and the ownership structure matter?," Economics Bulletin, AccessEcon, vol. 35(4), pages 2487-2505.
    3. Shaar, Karam & Baharumshah, Ahmad Zubaidi, 2016. "US-China trade and exchange rate dilemma: The role of trade data discrepancy," Working Paper Series 5145, Victoria University of Wellington, School of Economics and Finance.
    4. Gilberto J Fraga & Waldemiro A. Silva Neto, 2017. "Determinants of Brazilian agribusiness exports to China," Economics Bulletin, AccessEcon, vol. 37(1), pages 94-106.

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