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An asymmetric analysis of the J‐curve effect in the commodity trade between China and the US

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  • Mohsen Bahmani‐Oskooee
  • Niloy Bose
  • Yun Zhang

Abstract

This paper follows a non‐linear ARDL error‐correction approach to examine the presence of the J‐curve in the commodity‐level trade between the United States and China. The analysis disaggregates the US–China trade flows by commodities and separately examines the trade balance responses of 97 commodities to the changes in the real yuan–US$ exchange rates. The analysis at the commodity level alleviates potential aggregation bias that is present in earlier studies offering little evidence for long‐run asymmetric effects of exchange rate on the China–US trade balance. We find strong support for short‐run asymmetric effects in the case of two‐third of the commodities, whereas significant long‐run asymmetric effects are present in the case of one‐third of the commodities including those commodities which command large shares in the China–US trade.

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  • Mohsen Bahmani‐Oskooee & Niloy Bose & Yun Zhang, 2019. "An asymmetric analysis of the J‐curve effect in the commodity trade between China and the US," The World Economy, Wiley Blackwell, vol. 42(10), pages 2854-2899, October.
  • Handle: RePEc:bla:worlde:v:42:y:2019:i:10:p:2854-2899
    DOI: 10.1111/twec.12829
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    2. Hurley, Dene T. & Papanikolaou, Nikolaos, 2021. "Autoregressive Distributed Lag (ARDL) analysis of U.S.-China commodity trade dynamics," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 454-467.

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