IDEAS home Printed from https://ideas.repec.org/a/sae/fortra/v52y2017i3p171-184.html
   My bibliography  Save this article

Currency Manipulations and Bilateral Trade Between China and the USA

Author

Listed:
  • Masoud Moghaddam
  • Jie Duan

Abstract

The US trade deficit with China has existed for a long time, and its dollar value has been on the rise recently. It is widely believed that the main culprit is the manipulated value of Renminbi relative to the US dollar. Towards that end, this article re-examines the spot exchange rate and bilateral trade nexus using the Fourier approximation and a variant of the well-known gravity model during the sample period 1993: q1–2014: q1. Although China’s exports to the US Granger cause the exchange rate in a co-integrated space, the findings of a vector error correction model indicate that there is not a strong relation between the two. Indeed, within the aforementioned sample, only 15.52 per cent of changes in China’s exports to the USA are attributable to changes in the spot exchange rate. This is noticeably much smaller than impacts of the other variables utilized in the estimated gravity model. As such, the palpable trade imbalance between the USA and China cannot be single-handedly blamed on the spot exchange rate manipulations.

Suggested Citation

  • Masoud Moghaddam & Jie Duan, 2017. "Currency Manipulations and Bilateral Trade Between China and the USA," Foreign Trade Review, , vol. 52(3), pages 171-184, August.
  • Handle: RePEc:sae:fortra:v:52:y:2017:i:3:p:171-184
    DOI: 10.1177/0015732516681869
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0015732516681869
    Download Restriction: no

    File URL: https://libkey.io/10.1177/0015732516681869?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
    ---><---

    References listed on IDEAS

    as
    1. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
    2. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    3. Lucas, Robert Jr., 1982. "Interest rates and currency prices in a two-country world," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 335-359.
    4. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    5. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    6. 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.
    7. Enders, Walter & Lee, Junsoo, 2012. "The flexible Fourier form and Dickey–Fuller type unit root tests," Economics Letters, Elsevier, vol. 117(1), pages 196-199.
    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. Hasanov, Fakhri J. & Shannak, Sa'd, 2020. "Electricity incentives for agriculture in Saudi Arabia. Is that relevant to remove them?," Energy Policy, Elsevier, vol. 144(C).
    2. Gormus, Alper & Nazlioglu, Saban & Soytas, Ugur, 2018. "High-yield bond and energy markets," Energy Economics, Elsevier, vol. 69(C), pages 101-110.
    3. Bloch, Harry & Rafiq, Shuddhasattwa & Salim, Ruhul, 2015. "Economic growth with coal, oil and renewable energy consumption in China: Prospects for fuel substitution," Economic Modelling, Elsevier, vol. 44(C), pages 104-115.
    4. Kanjilal, Kakali & Ghosh, Sajal, 2013. "Environmental Kuznet’s curve for India: Evidence from tests for cointegration with unknown structuralbreaks," Energy Policy, Elsevier, vol. 56(C), pages 509-515.
    5. Perles-Ribes, José Francisco & Ramón-Rodríguez, Ana Belén & Rubia, Antonio & Moreno-Izquierdo, Luis, 2017. "Is the tourism-led growth hypothesis valid after the global economic and financial crisis? The case of Spain 1957–2014," Tourism Management, Elsevier, vol. 61(C), pages 96-109.
    6. Tang, Chor Foon, 2011. "Tourism, real output and real effective exchange rate in Malaysia: a view from rolling sub-samples," MPRA Paper 29379, University Library of Munich, Germany.
    7. Ahmed Raza ul MUSTAFA* & Mohammad NISHAT**, 2017. "ROLE OF SOCIAL PROTECTION IN POVERTY REDUCTION IN PAKISTAN: A Quantitative Approach," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 27(1), pages 67-88.
    8. Waqar Khalid & Ahmad Nawaz & Lamya Mohamed Aly Gadou & Saqib Ullah Khan & Huri Gül Aybudak, 2025. "Examining short-run and long-run nexus between economic growth, financial development, energy consumption and environmental degradation: empirical evidence for the Environmental Kuznets Curve Hypothes," Asia-Pacific Journal of Regional Science, Springer, vol. 9(2), pages 479-511, June.
    9. Lingaraj Mallick & Smruti Ranjan Behera & Mita Bhattacharya, 2024. "Impact of Exchange Rate on Trade Balance of India: Evidence from Threshold Cointegration with Asymmetric Error Correction Approach," Foreign Trade Review, , vol. 59(2), pages 279-308, May.
    10. Chor Foon Tang, 2015. "How Stable is the Savings-led Growth Hypothesis in Malaysia? The Bootstrap Simulation and Recursive Causality Tests," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 9(1), pages 1-17, February.
    11. Vinish Kathuria, 2019. "Growth and Investment: Testing for the Relationship for South Asian Countries," Millennial Asia, , vol. 10(3), pages 337-371, December.
    12. Ali, Amjad & Ur Rehman, Hafeez, 2015. "Macroeconomic Instability and Its Impact on Gross Domestic Product: An Empirical Analysis of Pakistan," MPRA Paper 71037, University Library of Munich, Germany.
    13. Muhammad Shafiullah & Faridul Islam & Ravinthirakumaran Navaratnam, 2020. "The Harberger–Laursen–Metzler effect: evidence from five SAARC countries," Empirical Economics, Springer, vol. 58(4), pages 1749-1777, April.
    14. Shahbaz, Muhammad & Khraief, Naceur & Jemaa, Mohamed Mekki Ben, 2015. "On the causal nexus of road transport CO2 emissions and macroeconomic variables in Tunisia: Evidence from combined cointegration tests," Renewable and Sustainable Energy Reviews, Elsevier, vol. 51(C), pages 89-100.
    15. Audi, Marc & Ali, Amjad, 2017. "Socio-Economic Development, Demographic Changes And Total Labor Productivity In Pakistan: A Co-Integrational and Decomposition Analysis," MPRA Paper 82435, University Library of Munich, Germany, revised Jun 2017.
    16. Razvan Pascalau & Junsoo Lee & Saban Nazlioglu & Yan (Olivia) Lu, 2022. "Johansen‐type cointegration tests with a Fourier function," Journal of Time Series Analysis, Wiley Blackwell, vol. 43(5), pages 828-852, September.
    17. Pooja Joshi & Arun Kumar Giri, 2015. "Fiscal Deficits and Stock Prices in India: Empirical Evidence," IJFS, MDPI, vol. 3(3), pages 1-18, August.
    18. Debashis Chakraborty & Jaydeep Mukherjee & Tanaya Sinha, 2012. "Is there any Long-run Relationship between India’s Current and Capital Account Balance? A Time Series Analysis," Global Business Review, International Management Institute, vol. 13(3), pages 433-447, October.
    19. Agovino, Massimiliano & Bartoletto, Silvana & Garofalo, Antonio, 2019. "Modelling the relationship between energy intensity and GDP for European countries: An historical perspective (1800–2000)," Energy Economics, Elsevier, vol. 82(C), pages 114-134.
    20. Litsios, Ioannis & Pilbeam, Keith, 2017. "An empirical analysis of the nexus between investment, fiscal balances and current account balances in Greece, Portugal and Spain," Economic Modelling, Elsevier, vol. 63(C), pages 143-152.

    More about this item

    Keywords

    Bilateral trade; Fourier approximation; gravity model; co-integration; vector error correction; variance decomposition;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F3 - International Economics - - International Finance

    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:sae:fortra:v:52:y:2017:i:3:p:171-184. 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: SAGE Publications (email available below). General contact details of provider: .

    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.