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Exchange rate fluctuations and the trade balance between China and Australia: An empirical study

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  • By Sihong WU

    (School of Business and Governance, Murdoch University, Australia)

Abstract

This paper uses Johansen cointegration test and a vector error correction model (VEC) to analyze the relationship between the trade balance and real bilateral exchange rate among Australia and China during 1990 to 2016.This paper suggest that the fluctuations of the real exchange rate will have impacts for China and Australia in the short run, but will have little or no impacts in the long run. This is inconsistent with the findings of previous studies suggesting that there has a J-Curve effect in the long run. As to what factors in the long run have cushioned the impacts of exchange rate fluctuations on the trade relations between Australia and China, we still need to continue exploring in the future.

Suggested Citation

  • By Sihong WU, 2018. "Exchange rate fluctuations and the trade balance between China and Australia: An empirical study," Journal of Economics and Political Economy, EconSciences Journals, vol. 5(4), pages 424-438, December.
    • Handle: RePEc:cvv:journ1:v:5:y:2018:i:4:p:424-438
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    References listed on IDEAS

    as
    1. 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.
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    Keywords

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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