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The effect of China's RMB exchange rate movement on its agricultural export

Author

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  • Longjiang Chen

Abstract

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.

Suggested Citation

  • Longjiang Chen, 2011. "The effect of China's RMB exchange rate movement on its agricultural export," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 3(1), pages 26-41, February.
    • Handle: RePEc:eme:caerpp:v:3:y:2011:i:1:p:26-41
    DOI: 10.1108/17561371111103525
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    Citations

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    Cited by:

    1. Qianhui Gao & Shoichi Ito & Kolawole Ogundari & Hisamitsu Saito, 2016. "Evaluating Welfare Effects of Rice Import Quota in Japan: Based on Measuring Non-Tariff Barriers of SBS Rice Imports," Sustainability, MDPI, vol. 8(8), pages 1-13, August.
    2. Upadhyaya, Kamal & Bhandari, Rabindra & Mixon, Franklin G. JR., 2020. "Exchange Rate Volatility and its Impact on China's Trade with the United States," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(3), pages 373-388.
    3. Li Cui & Kuo-Jui Wu & Ming-Lang Tseng, 2016. "Exploring a Novel Agricultural Subsidy Model with Sustainable Development: A Chinese Agribusiness in Liaoning Province," Sustainability, MDPI, vol. 9(1), pages 1-15, December.
    4. Luo, Ji & Williams, Gary W., 2015. "The Impacts of Chinese Exchange Rate Policy on World Soybean and Products Markets," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205075, Agricultural and Applied Economics Association.

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