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On the link between Chinese currency and its inpayments from and outpayments to trading partners: an asymmetric analysis

Author

Listed:
  • Mohsen Bahmani-Oskooee

    (The University of Wisconsin-Milwaukee)

  • Jia Xu

    (Shanghai International Studies University)

Abstract

A country devalues or allows its currency to depreciate so that it can export more and increase its inpayments and import less to reduce its outpayments. Since exchange rate changes work through affecting traded goods prices and since there is evidence that prices adjust to exchange rate changes in an asymmetric manner, we conjecture that China’s inpayments from trading partners and its outpayments to trading partners also adjust asymmetrically to exchange rate changes. Since estimating asymmetric effects of exchange rate changes requires using nonlinear models, such models yield much more significant results than the traditional linear models. Indeed, this is the case in the trade between China and its 21 major trading partners.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Jia Xu, 2022. "On the link between Chinese currency and its inpayments from and outpayments to trading partners: an asymmetric analysis," Economic Change and Restructuring, Springer, vol. 55(1), pages 335-359, February.
    • Handle: RePEc:kap:ecopln:v:55:y:2022:i:1:d:10.1007_s10644-020-09317-1
    DOI: 10.1007/s10644-020-09317-1
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    More about this item

    Keywords

    Inpayments; Outpayments; China; 21 partners; Asymmetric analysis;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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