nach oben

Economic Change and Restructuring

Erschienen in:

07.01.2021

On the link between Chinese currency and its inpayments from and outpayments to trading partners: an asymmetric analysis

verfasst von: Mohsen Bahmani-Oskooee, Jia Xu

Erschienen in: Economic Change and Restructuring | Ausgabe 1/2022

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

A country devalues or allows its currency to depreciate so that it can export more and increase its inpayments and import less to reduce its outpayments. Since exchange rate changes work through affecting traded goods prices and since there is evidence that prices adjust to exchange rate changes in an asymmetric manner, we conjecture that China’s inpayments from trading partners and its outpayments to trading partners also adjust asymmetrically to exchange rate changes. Since estimating asymmetric effects of exchange rate changes requires using nonlinear models, such models yield much more significant results than the traditional linear models. Indeed, this is the case in the trade between China and its 21 major trading partners.

Vorheriger Artikel Re-examining the effect of financial markets and institutions on economic growth: evidence from the OECD countries

Nächster Artikel On the relationship between Asian exchange rates and stock prices: a nonlinear analysis

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nur mit Berechtigung zugänglich

It should be noted that several studies have estimated the J-curve effect for China. The J-curve effect basically asserts that trade balance worsens in the short run but improves in the long run, after a currency depreciation. Examples include Brada et al. (1993), Zhang (1998, 1999) and Weixian (1999). Zhang (1999) also reviews China’s exchange rate policy.

Note that some have only considered the link between trade flows and the exchange rate and engaged in Granger causality, assuming the link is symmetric, e.g., Gradojevic and Neely (2008). Some others have assessed asymmetric effects of exchange rate volatility and not the exchange rate itself. Examples include Fang et al. (2009), Yuan and Yang (2016), Bahmani-Oskooee and Aftab (2017) and Bahmani-Oskooee and Nouira (2020).

Note that the estimates of these coefficients must also be negative. Note also that Bahmani-Oskooee (2020) has demonstrated that the estimates of λ₀ in (3) and λ’₀ in (4) are the same estimates of the coefficient attached to the lagged error-correction term in Engle and Granger (1987) settings.

Another advantage of this method is that it performs better in models that sample size is small. This is demonstrated by Panopoulou, E. and N. Pittis (2004),

Indeed, in applying the F test for cointegration Shin et al. (2014, p. 291) recommend treating the two partial sum variables as one variable so that the critical values of the F test stay at the same high level in both the linear and nonlinear models.

Note that Shin et al (2014, p. 291) recommend using the same critical values for the F but not for the t test when we move from linear to nonlinear models.

For some other applications see Halicioglu (2008), Nusair (2016), Kisswani and Nusair (2014), Durmaz (2015), Baghestani and Kherfi (2015), Aftab et al. (2017) and Hajilee and Niroomand (2019).

We have also tested for model misspecification using Ramsey’s RESET test. Due to lack of space we have reported the results in the notes to Table 3.

Other diagnostics are similar to those of the linear model and need no repetition.

Again, other diagnostics are similar to those of the nonlinear inpayment models and repetition is not needed. Assessing asymmetric effects of the exchange rate on other macrovariables is now becoming a common practice. For example, Koutmos and Martin (2003) test asymmetric effects of exchange rate exposure on stock returns on nine sector indexes across four major countries. Chien-Hsiu (2011) does the same in the Asian emerging stock markets and Bahmani-Oskooee and Saha (2016a, 2016b) in other stock markets.

Aftab M, Syed KBS, Katper NA (2017) Exchange-rate volatility and Malaysian-Thai bilateral industry trade flows. J Econ Stud 44:99–114CrossRef

Baghestani H, Kherfi S (2015) An error-correction modeling of US consumer spending: are there asymmetries? J Econ Stud 42:1078–1094CrossRef

Bahmani-Oskooee, M (2020), The J-curve and the effects of exchange rate changes on the trade balance, in Francisco L Rivera-Batiz, eds., of Francisco L Rivera-Batiz, ed., Encyclopedia of International Economics and Global Trade, World Scientific Publishing Co., Singapore, chapter 11, pp. 297–319

Bahmani-Oskooee M, Ratha A (2008) Exchange rate sensitivity of US bilateral trade flows. Econ Sys 32:129–141CrossRef

Bahmani-Oskooee M, Saha S (2016a) Do exchange rate changes have symmetric or asymmetric effects on stock prices? Glob Finance J 31:57–72CrossRef

Bahmani-Oskooee M, Saha S (2016b) Asymmetry cointegration between the value of the dollar and sectoral stock indices in the U.S. Int Rev Econ Finance 46:78–86CrossRef

Bahmani-Oskooee M, Aftab M (2017) On the asymmetric effects of exchange rate volatility on trade flows: new evidence from US-Malaysia trade at industry level. Econ Model 63:86–103CrossRef

Bahmani-Oskooee M, Arize A (2019) The sensitivity of US inpayments and outpayments to real exchange rate changes: asymmetric evidence from Africa. Int Econ J 33:455–472CrossRef

Bahmani-Oskooee M, Nouira R (2020) On the impact of exchange rate volatility on Tunisia’s trade with 16 partners: an asymmetry analysis. Econ Change Restruct, Forthcom 53(3):357CrossRef

Banerjee A, Dolado J, Mestre R (1998) Error-correction mechanism tests in a single equation framework. J Time Ser Anal 19:267–285CrossRef

Bergstrand JH (1987), The US trade deficit: a perspective from selected bilateral trade models. New England Econ Rev. May–June Issue, pp. 19–31

Brada JC, Kutan A, Zhou S (1993) China’s exchange rate and the balance of trade. Econ Plann 26:229–242CrossRef

Bussiere M (2013) Exchange rate pass-through to trade prices: the role of nonlinearities and asymmetries. Oxford Bull Econ Stat 75:731–758CrossRef

Chien-Hsiu L (2011) Exchange rate exposure in the Asian emerging markets. J Multinatl Financ Manag 21:224–238CrossRef

Cushman DO (1987) US bilateral trade balances and the dollar. Econ Lett 24:363–367CrossRef

Durmaz N (2015) Industry level J-curve in Turkey. J Econ Stud 42:689–706CrossRef

Halicioglu F (2008) The bilateral J-curve: Turkey versus her 13 trading partners. J Asian Econ 19(3):236–243CrossRef

Engle RF, Granger CWJ (1987) Cointegration and error correction: representation, estimation, and testing. Econ 55(2):251–276

Fang W, Lai Y, Miller SM (2009) Does exchange rate risk affect exports asymmetrically? Asian evidence. J Int Money Financ 28:215–239CrossRef

Gradojevic N, CJ Neely (2008) The dynamic interaction of trading flows, macroeconomic announcements and the CAD/USD exchange rate: evidence from disaggregated data. Federal Reserve Fed of St. Louise Working Paper Series, Working Paper 2008–006C http://research.stlouisfed.org/wp/2008/2008-006.pdf, pp. 1–35

Hajilee M, Niroomand F (2019) On the link between financial market inclusion and trade openness: an asymmetric analysis. Econ Anal Policy 62:373–381CrossRef

Haynes SE, Hutchison MM, Mikeseli RF (1986) US-Japanese bilateral trade and the Yen-Dollar exchange rate: an empirical analysis. South Econ J 52:923–932CrossRef

Kisswani KM, Nusair SA (2014) Nonlinear convergence in Asian interest and inflation rates. Econ Change Restruct 47:155–186CrossRef

Koutmos G, Martin AD (2003) Asymmetric exchange rate exposure: theory and evidence. J Int Money Finance 22:365–383CrossRef

Narayan PK (2005) The saving and investment nexus for China: evidence from cointegration tests. Appl Econ 37:1979–1990CrossRef

Nusair SA (2016) The J-curve phenomenon in European transition economies: a nonlinear ARDL approach. Int Rev Appl Econ 31:1–27CrossRef

Pesaran HM, Shin Y, Smith RJ (2001) Bounds testing approach to the analysis of level relationships. J Appl Econ 16:289–326CrossRef

Panopoulou E, Pittis N (2004) A comparison of autoregressive distributed lag and dynamic ols cointegration estimators in the case of a serially correlated cointegration error. Econ J 7:585–617

Shin Y, Yu BC, Greenwood-Nimmo M (2014) Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ardl framework festschrift in honor of peter schmidt: econometric methods and applications, eds. R Sickels, W Horrace, Springer. New York. 281–314

Weixian W (1999) An empirical study of the foreign trade balance in China. Appl Econ Lett 6:485–490CrossRef

Yuan Z, Yang Z (2016) “Does exchange rate volatility affect China’s exports asymmetrically? Xitong Gongcheng Lilun yu Shijian/Sys Eng Theory Practice 36(2):308–318

Zhang Z (1998) Does devaluation of the Renminbi improve China’s balance of trade? Econ Int 51(3):437–445

Zhang Z (1999) China’s exchange rate reform and its impact on the balance of trade and domestic inflation. Asia Pacific J Econ Bus 3(2):4–22

Titel: On the link between Chinese currency and its inpayments from and outpayments to trading partners: an asymmetric analysis
verfasst von: Mohsen Bahmani-Oskooee
Jia Xu
Publikationsdatum: 07.01.2021
Verlag: Springer US
Erschienen in: Economic Change and Restructuring / Ausgabe 1/2022
Print ISSN: 1573-9414
Elektronische ISSN: 1574-0277
DOI: https://doi.org/10.1007/s10644-020-09317-1

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 1/2022

Nexus between defence spending, economic growth and development: evidence from a disaggregated panel data analysis

On the relationship between Asian exchange rates and stock prices: a nonlinear analysis

Do exchange rate changes have threshold effects on the trade balance? Evidence from Tunisia

Oil price changes and wages: a nonlinear and asymmetric approach

Re-examining the effect of financial markets and institutions on economic growth: evidence from the OECD countries

The role of capital taxation on the business cycle: the case of Chile, 1960–2019

Premium Partner