The Exchange Value of the Renminbi and China's Balance of Trade: An Emp irical Study / Zhaoyong Zhang.

By:

Zhang, Zhaoyong

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w5771.Publication details: Cambridge, Mass. National Bureau of Economic Research 1996.Description: 1 online resource: illustrations (black and white)Subject(s):

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: This paper aims at assessing the relationship between the exchange value of the Chinese Renminbi (RMG) and China's trade balance by means of some recent econometric techniques designed to evaluate the existence and the direction of causality. We find strong evidence suggesting that changes in the trade balance and each of its components Granger-cause changes in the exchange rate but no evidence indicating a causal link running from the exchange rate to the trade balance. Our results seem to be rather supportive of the accommodative role of the exchange rate proposed by the modern theory of the trade balance determination and not supportive of the existence of a J-curve in China's trade balance. Our finding of a bidirectional causal relationship between the real exchange rate and the price variables confirms the presence of a vicious circle hypothesis following currency devaluation. This has important implications for the discussions of impacts of the RMB devaluation on China's trade balance.

Tags from this library: No tags from this library for this title. Log in to add tags.

Average rating: 0.0 (0 votes)

Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w5771 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

Collection: Colección NBER Close shelf browser (Hides shelf browser)

Previous	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	Next
Previous	nber w5768 Trade and Environment Beyond Singapore /	nber w5769 Do Markets Respond More to More Reliable Labor Market Data? A Test of Market Rationality /	nber w5770 Estimating the Welfare Effects of Digital Infrastructure /	nber w5771 The Exchange Value of the Renminbi and China's Balance of Trade: An Emp irical Study /	nber w5772 Debt, Cash Flow and Inflation Incentives: A Swedish Example /	nber w5773 Diffusion of General Purpose Technologies /	nber w5774 The Decline of Welfare Benefits in the U.S.: The Role of Wage Inequality /	Next

September 1996.

This paper aims at assessing the relationship between the exchange value of the Chinese Renminbi (RMG) and China's trade balance by means of some recent econometric techniques designed to evaluate the existence and the direction of causality. We find strong evidence suggesting that changes in the trade balance and each of its components Granger-cause changes in the exchange rate but no evidence indicating a causal link running from the exchange rate to the trade balance. Our results seem to be rather supportive of the accommodative role of the exchange rate proposed by the modern theory of the trade balance determination and not supportive of the existence of a J-curve in China's trade balance. Our finding of a bidirectional causal relationship between the real exchange rate and the price variables confirms the presence of a vicious circle hypothesis following currency devaluation. This has important implications for the discussions of impacts of the RMB devaluation on China's trade balance.