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On the asymmetric effects of exchange rate uncertainty on China’s bilateral trade with its major partners

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  • Xu, Jia
  • Bahmani-Oskooee, Mohsen
  • Karamelikli, Huseyin

Abstract

Following recent advances in asymmetric impact of exchange rate volatility on trade flows, we assess the symmetric and asymmetric effects of exchange rate volatility on China’s bilateral trade with each of its 21 trading partners. We find symmetric effects in only a few bilateral trade models. However, the asymmetric analysis which required using nonlinear models revealed short-run asymmetric effects in almost all export and import demand models and log-run significant asymmetric effects in 50% of the models. In almost all models, while increased volatility was found to hurt Chinese trade, decreased volatility was found to boost them, implying that stable exchange rate is beneficial for China’s trade.

Suggested Citation

  • Xu, Jia & Bahmani-Oskooee, Mohsen & Karamelikli, Huseyin, 2022. "On the asymmetric effects of exchange rate uncertainty on China’s bilateral trade with its major partners," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 653-669.
    • Handle: RePEc:eee:ecanpo:v:73:y:2022:i:c:p:653-669
    DOI: 10.1016/j.eap.2021.12.017
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    More about this item

    Keywords

    Exchange rate uncertainty; China; 15 partners; Trade; Asymmetric analysis;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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