IDEAS home Printed from https://ideas.repec.org/a/ris/eaerev/0348.html
   My bibliography  Save this article

Asset Price, the Exchange Rate, and Trade Balances in China: A Sign Restriction VAR Approach

Author

Listed:
  • Wongi, Wongi

    (Chonnam National University)

Abstract

Although asset price is an important factor in determining changes in external balances, no studies have investigated it from the Chinese perspective. In this study, I empirically examine the underlying driving forces of China’s trade balances, particularly the role of asset price and the real exchange rate. To this end, I estimate a sign-restricted structural vector autoregressive model with quarterly time series data for China, using the Bayesian method. The results show that changes in asset price affect China’s trade balances through private consumption and investment. Also, an appreciation of the real exchange rate tends to deteriorate trade balances in China. Furthermore, forecast error variance decomposition results indicate that changes in asset price (stock price and housing price) explain about 20% variability of trade balances, while changes in the real exchange rate can explain about 10%.

Suggested Citation

  • Wongi, Wongi, 2018. "Asset Price, the Exchange Rate, and Trade Balances in China: A Sign Restriction VAR Approach," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 22(3), pages 371-400, September.
    • Handle: RePEc:ris:eaerev:0348
    DOI: 10.11644/KIEP.EAER.2018.22.3.348
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.11644/KIEP.EAER.2018.22.3.348
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.11644/KIEP.EAER.2018.22.3.348?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
    ---><---

    More about this item

    Keywords

    Stock Price; Housing Price; Real Effective Exchange Rate; China Trade Balance; Sign Restriction VAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    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:ris:eaerev:0348. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: JE Lee (email available below). General contact details of provider: https://edirc.repec.org/data/kieppkr.html .

    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.