IDEAS home Printed from https://ideas.repec.org/a/pal/compes/v59y2017i3d10.1057_s41294-017-0025-5.html
   My bibliography  Save this article

The Impact of the Exchange Rate and Trade Composition on China’s Trade Balance Vis-à-Vis Selected Partner Countries

Author

Listed:
  • Biswajit Banerjee

    (Ministry of Finance of the Slovak Republic
    Ashoka University)

  • Haiyan Shi

    (International Monetary Fund)

  • Jan Radovan

    (Bank of Slovenia)

  • Yingying Sheng

    (Goldman Sachs International)

  • Xin Li

    (International Monetary Fund)

Abstract

In a departure from most studies, this paper examines in a multivariate context the influence of both the exchange rate and structural factors on China’s trade balance vis-à-vis selected partner countries. Structural change is proxied by the evolution of the labour skill composition of trade. The empirical findings indicate that China’s large trade surplus cannot be attributed to exchange rate policy alone. The large persistent trade surplus also reflects improvement in non-price competitiveness arising from the fact that China’s exports are rising up the skill ladder and imports are moving down the skill ladder.

Suggested Citation

  • Biswajit Banerjee & Haiyan Shi & Jan Radovan & Yingying Sheng & Xin Li, 2017. "The Impact of the Exchange Rate and Trade Composition on China’s Trade Balance Vis-à-Vis Selected Partner Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(3), pages 311-344, September.
    • Handle: RePEc:pal:compes:v:59:y:2017:i:3:d:10.1057_s41294-017-0025-5
    DOI: 10.1057/s41294-017-0025-5
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41294-017-0025-5
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41294-017-0025-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Anthony J. Makin, 2007. "Does China's Huge External Surplus Imply an Undervalued Renminbi?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(3), pages 89-102, May.
    2. Cho, Guedae & Koo, Won W., 2004. "The Trade Imbalance Between The United States And China: The Role Of Exchange Rate And Trade Liberalization," Agribusiness & Applied Economics Report 23553, North Dakota State University, Department of Agribusiness and Applied Economics.
    3. Michael R. M. Abrigo & Inessa Love, 2016. "Estimation of panel vector autoregression in Stata," Stata Journal, StataCorp LP, vol. 16(3), pages 778-804, September.
    4. Bianka Dettmer & Fredrik Erixon & Andreas Freytag & Pierre Olivier Legault Tremblay, 2009. "The Dynamics of Structural Change - The European Union's Trade with China," Jena Economics Research Papers 2009-053, Friedrich-Schiller-University Jena.
    5. Morris Goldstein & Nicholas Lardy, 2017. "China’s Exchange Rate Policy Dilemma," World Scientific Book Chapters, in: TRADE CURRENCIES AND FINANCE, chapter 20, pages 667-675, World Scientific Publishing Co. Pte. Ltd..
    6. Won W. Koo & Renan Zhuang, 2007. "The Role Of Exchange Rate In Sino‐U.S. Bilateral Trade," Contemporary Economic Policy, Western Economic Association International, vol. 25(3), pages 362-373, July.
    7. Zhang, Yin & Wan, Guanghua, 2007. "What accounts for China's trade balance dynamics?," Journal of Policy Modeling, Elsevier, vol. 29(6), pages 821-837.
    8. Przemyslaw Kowalski & Nora Dihel, 2009. "India's Trade Integration, Realising the Potential," OECD Trade Policy Papers 88, OECD Publishing.
    9. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    10. Przemyslaw Kowalski, 2008. "China and India - A Tale of Two Trade Integration Approaches," Trade Working Papers 22170, East Asian Bureau of Economic Research.
    11. Yu, Miaojie, 2009. "Revaluation of the Chinese Yuan and triad trade: A gravity assessment," Journal of Asian Economics, Elsevier, vol. 20(6), pages 655-668, November.
    12. Yongqing Wang & Guanghua Wan, 2008. "China's Trade Imbalances: The Role of FDI," WIDER Working Paper Series RP2008-103, World Institute for Development Economic Research (UNU-WIDER).
    13. Michael R.M. Abrigo & Inessa Love, 2016. "Estimation of Panel Vector Autoregression in Stata: a Package of Programs," Working Papers 201602, University of Hawaii at Manoa, Department of Economics.
    14. Przemyslaw Kowalski, "undated". "China and India: A Tale of Two Trade Integration Approaches," Indian Council for Research on International Economic Relations, New Delhi Working Papers 221, Indian Council for Research on International Economic Relations, New Delhi, India.
    15. Michael Peneder, 1999. "Intangible Investment and Human Resources. The New WIFO Taxonomy of Manufacturing Industries," WIFO Working Papers 114, WIFO.
    16. repec:zbw:bofitp:2007_006 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kazemzadeh, Emad & Fuinhas, José Alberto & Koengkan, Matheus & Shadmehri, Mohammad Taher Ahmadi, 2023. "Relationship between the share of renewable electricity consumption, economic complexity, financial development, and oil prices: A two-step club convergence and PVAR model approach," International Economics, Elsevier, vol. 173(C), pages 260-275.
    2. Dimitrios Karamanis, 2022. "Defence partnerships, military expenditure, investment, and economic growth: an analysis in PESCO countries," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 173, Hellenic Observatory, LSE.
    3. MAÏ ASSAN CHEDI, Maman, 2022. "Does Defence Expenditure Affect Education and Health expenditures in Saharan Africa?," African Journal of Economic Review, African Journal of Economic Review, vol. 10(4), September.
    4. Charles Shaaba Saba & Nicholas Ngepah, 2022. "ICT Diffusion, Industrialisation and Economic Growth Nexus: an International Cross-country Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(3), pages 2030-2069, September.
    5. Kumeka, Terver Theophilus & Uzoma-Nwosu, Damian Chidozie & David-Wayas, Maria Onyinye, 2022. "The effects of COVID-19 on the interrelationship among oil prices, stock prices and exchange rates in selected oil exporting economies," Resources Policy, Elsevier, vol. 77(C).
    6. Mohamed Traoré, 2018. "Government spending and inclusive growth in sub-Saharan Africa: A panel VAR analysis," Working Papers hal-01940506, HAL.
    7. Piotr Bialowolski & Dorota Weziak-Bialowolska, 2021. "Longitudinal Evidence for Reciprocal Effects Between Life Satisfaction and Job Satisfaction," Journal of Happiness Studies, Springer, vol. 22(3), pages 1287-1312, March.
    8. Muhammad Azeem Qureshi & Minhas Akbar & Ahsan Akbar & Petra Poulova, 2021. "Do ESG Endeavors Assist Firms in Achieving Superior Financial Performance? A Case of 100 Best Corporate Citizens," SAGE Open, , vol. 11(2), pages 21582440211, June.
    9. Zouaoui, Haykel & Zoghlami, Feten, 2020. "On the income diversification and bank market power nexus in the MENA countries: Evidence from a GMM panel-VAR approach," Research in International Business and Finance, Elsevier, vol. 52(C).
    10. Kannyiri Banyen & Nicholas Biekpe, 2020. "Financial integration, competition and bank efficiency: evidence from Africa’s sub-regional markets," Economic Change and Restructuring, Springer, vol. 53(4), pages 495-518, November.
    11. Charfeddine, Lanouar & Zaouali, Sana, 2022. "The effects of financial inclusion and the business environment in spurring the creation of early-stage firms and supporting established firms," Journal of Business Research, Elsevier, vol. 143(C), pages 1-15.
    12. Ioannis Kostakis, 2020. "Is Tourism a Key Factor for Economic Growth? Fresh Evidence from South Europe Using Panel Cointegration and PVAR Analyses," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 6(2), pages 123-138, December.
    13. Sleibi, Yacoub & Casalin, Fabrizio & Fazio, Giorgio, 2020. "Bank-specific shocks and aggregate leverage: Empirical evidence from a panel of developed countries," Journal of Financial Stability, Elsevier, vol. 49(C).
    14. Lopez-Medoza, Hector & González-Álvarez, Maria A. & Montañés, Antonio, 2023. "Assessing the effectiveness of international government responses to the COVID-19 pandemic," MPRA Paper 117826, University Library of Munich, Germany.
    15. Mohamed Traoré, 2018. "Government spending and inclusive growth in sub-Saharan Africa: A panel VAR analysis," CERDI Working papers hal-01940506, HAL.
    16. Morales, Luis Emilio & Balie, Jean & Magrini, Emiliano, 2021. "How has the minimum support price policy of India affected cross-commodity price linkages?," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 24(2), February.
    17. Ryan H. Murphy & Colin O’Reilly, 2019. "Applying panel vector autoregression to institutions, human capital, and output," Empirical Economics, Springer, vol. 57(5), pages 1633-1652, November.
    18. Sigmund, Michael & Ferstl, Robert, 2021. "Panel vector autoregression in R with the package panelvar," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 693-720.
    19. sheunesu zhou, 2020. "Shadow Banking, Bank Liquidity and Monetary Policy Shocks in Emerging Countries: A Panel VAR Approach," Journal of Economics and Behavioral Studies, AMH International, vol. 11(6), pages 46-59.
    20. Björn Brey & Matthias S. Hertweck, 2023. "The dynamic effects of monsoon rainfall shocks on agricultural yield, wages, and food prices in India," Scandinavian Journal of Economics, Wiley Blackwell, vol. 125(3), pages 616-654, July.

    More about this item

    Keywords

    trade balance; exchange rate; skill composition of trade; revealed comparative advantage; China; United States; EU; India; ASEAN;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:compes:v:59:y:2017:i:3:d:10.1057_s41294-017-0025-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.