U.S. Bilateral Trade Deficits with China and Japan: The Role of Japanese Direct Investment
This paper argues that Japanese Foreign Direct Investment (FDI) in China plays a critical role in home and host country’s bilateral trade imbalances with the U.S. Using six cross-sectional panel data from 1981 to 2007, we find strong evidence in support of the role of Japanese FDI in mounting U.S.-China trade imbalance and in reducing deficit of U.S. trade with Japan. The devaluation of Chinese Yuan does not affect its bilateral trade balance with the U.S. and there are mixed evidence in terms of the relationship between the Japanese Yen exchange rate and the U.S.-Japan trade deficit.
|Date of creation:||May 2010|
|Publication status:||Published in The Empirical Economics Letters 6.10(2011): pp. 527-534|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
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- Menzie D. Chinn, 2004.
"Incomes, Exchange Rates and the US Trade Deficit, Once Again,"
Wiley Blackwell, vol. 7(3), pages 451-469, December.
- Chinn, Menzie, 2002. "Incomes, Exchange Rates and the U.S. Trade Deficit, Once Again," Center for Global, International and Regional Studies, Working Paper Series qt0tc442fc, Center for Global, International and Regional Studies, UC Santa Cruz.
- Mohsen Bahmani-Oskooee & Zohre Ardalani, 2006. "Exchange Rate Sensitivity of U.S. Trade Flows: Evidence from Industry Data," Southern Economic Journal, Southern Economic Association, vol. 72(3), pages 542-559, January.
- Thomas Klitgaard & Karen Schiele, 1997. "The growing U.S. trade imbalance with China," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 3(May).
- Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-125, May.
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