Arbeitspapier

The structural behavior of China–US trade flows

We examine Chinese-US trade flows over the 1994-2012 period, and find that, in line with the conventional wisdom, the value of China's exports to the US responds negatively to real renminbi (RMB) appreciation, while import responds positively. Further, the combined empirical price effects on exports and imports imply an increase in the real value of the RMB will reduce China's trade balance. The use of alternative exchange rate measures and data on different trade classifications yields additional insights. Firms more subject to market forces exhibit greater price sensitivity. The price elasticity is larger for ordinary exports than for processing exports. Finally, accounting for endogeneity and measurement error matters. Hence, the purging the real exchange rate of the portion responding to policy, or using the deviation of the real exchange rate from the equilibrium level yields a stronger measured effect than when using the unadjusted bilateral exchange rate. Publication

ISBN
978-952-323-011-8
Language
Englisch

Bibliographic citation
Series: BOFIT Discussion Papers ; No. 23/2014

Classification
Wirtschaft
Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
Open Economy Macroeconomics
Subject
import
export
elasticity
real exchange rate
processing trade

Event
Geistige Schöpfung
(who)
Cheung, Yin-Wong
Chinn, Menzie D.
Qian, XingWang
Event
Veröffentlichung
(who)
Bank of Finland, Institute for Economies in Transition (BOFIT)
(where)
Helsinki
(when)
2014

Handle
Last update
10.03.2025, 11:41 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Cheung, Yin-Wong
  • Chinn, Menzie D.
  • Qian, XingWang
  • Bank of Finland, Institute for Economies in Transition (BOFIT)

Time of origin

  • 2014

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