Effects of exchange rate and income on the US bilateral trade with China under Chinese managed floating exchange rate system
Journal of Chinese Economic and Foreign Trade Studies
ISSN: 1754-4408
Article publication date: 12 October 2018
Issue publication date: 25 October 2018
Abstract
Purpose
China’s exchange rate system remains a public concern. This paper aims to investigate the effects of the appreciation of the US dollar (or depreciation of Chinese Yuan) under China’s “managed floating exchange rate system” on the US bilateral trade deficit with China, the US exports to China and the US imports from China.
Design/methodology/approach
The author uses quarterly data from 2005Q3 to 2017Q3 and applies autoregressive distributed lags model to carry out the empirical analysis.
Findings
The results suggest that both the US and Chinese income are important determinants of the US bilateral trade deficit with China, the US exports to China and the US imports from China. Further, the appreciation of the US dollar with respect to Chinese currency may discourage the US exports to China, but will not considerably promote the US imports from China in the long run. Finally, the appreciation of the US dollar does not contribute significantly to the US trade deficit with China in the long run.
Originality/value
Policymakers may want to pay attention to the results of currency depreciation on bilateral trade flows and trade balance in both the short and the long run. The results are different. Policymakers may also want to keep the following in mind: both the US and Chinese income are vital factors of bilateral trade balance, exports and imports.
Keywords
Citation
Wang, Y. (2018), "Effects of exchange rate and income on the US bilateral trade with China under Chinese managed floating exchange rate system", Journal of Chinese Economic and Foreign Trade Studies, Vol. 11 No. 3, pp. 236-246. https://doi.org/10.1108/JCEFTS-04-2018-0009
Publisher
:Emerald Publishing Limited
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