The effect of China's RMB exchange rate movement on its agricultural export: A case study of export to Japan
Purpose – The paper aims to examine the relationship between changes and volatility of China's Renminbi (RMB) exchange rates and its agricultural export. Design/methodology/approach – A GARCH(1, 1) model is specified to measure the exchange rate volatility and autoregressive distributed lag regression with structural break dummy variables is estimated based on the results of unit root test with structural break. Findings – The export supply model reveals that the net trade effect of RMB exchange rate movements relies on the comparison of exchange rate level change (appreciation or depreciation) effect and exchange rate risk effect. The empirical examination results, taking China's agricultural exports to Japan as a case, show RMB depreciation against yen will promote export growth while appreciation hinder export, and exchange rate volatility positively stimulates agricultural exports to Japan. However, the effect of exchange rate volatility on the export is much smaller than that of exchange rate level, which leads to a negative net effect to the export. Originality/value – The constructed model and applied methodology contribute to a better understanding of the relationship between changes and volatility of China's RMB exchange rates and its agricultural export.
Volume (Year): 3 (2011)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://www.emeraldinsight.com/caer.htm Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dixit, Avinash K & Stiglitz, Joseph E, 1975.
"Monopolistic Competition and Optimum Product Diversity,"
The Warwick Economics Research Paper Series (TWERPS)
64, University of Warwick, Department of Economics.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
- Jean-Philippe Gervais & Bruno Larue & Olivier Bonroy, 2004. "Investigating Non-Linearities in the Relationship Between Real Exchange Rate Volatility and Agricultural Trade," International Trade 0407004, EconWPA.
- Jacinto F. Fabiosa, 2002. "Assessing the Impact of the Exchange Rate and Its Volatility on Canadian Pork and Live Swine Exports to the United States and Japan," Food and Agricultural Policy Research Institute (FAPRI) Publications 02-wp305, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
- WenShwo Fang & Stephen M. Miller, 2004.
"Exchange rate depreciation and exports: The case of Singapore revisited,"
2004-45, University of Connecticut, Department of Economics.
- WenShwo Fang & Stephen Miller, 2007. "Exchange rate depreciation and exports: the case of Singapore revisited," Applied Economics, Taylor & Francis Journals, vol. 39(3), pages 273-277.
- Larson, Donald W. & Bittencourt, Maurício Vaz Lobo & Thompson, Stanley R., 2005. "An Examination of the Impacts of Exchange Rate Volatility on Sectoral Trade in the Mercosur," 2005 Annual meeting, July 24-27, Providence, RI 19572, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- James G. MacKinnon, 1995.
"Numerical Distribution Functions for Unit Root and Cointegration Tests,"
918, Queen's University, Department of Economics.
- MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
- Guedae Cho & Ian M. Sheldon & Steve McCorriston, 2002. "Exchange Rate Uncertainty and Agricultural Trade," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 931-942.
- Robert Dekle & Hyeok Jeong & Heajin Ryoo, 2006. "A Re-examination of the Exchange Rate Disconnect Puzzle: Evidence from Japanese Firm Level Data," IEPR Working Papers 06.46, Institute of Economic Policy Research (IEPR).
- Caglayan, M. & Baum, C.F. & Barkoulas, J.T., 1998.
"Exchange Rate Effects on the Volume and Variability of Trade Flows,"
1998/05, Koc University.
- Barkoulas, John T. & Baum, Christopher F. & Caglayan, Mustafa, 2002. "Exchange rate effects on the volume and variability of trade flows," Journal of International Money and Finance, Elsevier, vol. 21(4), pages 481-496, August.
- John Barkoulas & Christopher F. Baum & Mustafa Caglayan, 1998. "Exchange Rate Effects on the Volume and Variability of Trade Flows," Boston College Working Papers in Economics 405., Boston College Department of Economics, revised 12 Sep 2001.
- Paul De Grauwe, 1988. "Exchange Rate Variability and the Slowdown in Growth of International Trade," IMF Staff Papers, Palgrave Macmillan, vol. 35(1), pages 63-84, March.
- Betts, Caroline & Devereux, Michael B., 2000. "Exchange rate dynamics in a model of pricing-to-market," Journal of International Economics, Elsevier, vol. 50(1), pages 215-244, February.
- Klein, Michael W., 1990. "Sectoral effects of exchange rate volatility on United States exports," Journal of International Money and Finance, Elsevier, vol. 9(3), pages 299-308, September.
- Jacinto F. Fabiosa, 2002. "Assessing the Impact of the Exchange Rate and Its Volatility on Canadian Pork and Live Swine Exports to the United States and Japan," Center for Agricultural and Rural Development (CARD) Publications 02-wp305, Center for Agricultural and Rural Development (CARD) at Iowa State University.
- Kawai, Masahiro, 1981. "The Behaviour of an Open-Economy Firm under Flexible Exchange Rates," Economica, London School of Economics and Political Science, vol. 48(189), pages 45-60, February.
When requesting a correction, please mention this item's handle: RePEc:eme:caerpp:v:3:y:2010:i:1:26-41. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman)
If references are entirely missing, you can add them using this form.