The J-curve: evidence from commodity trade between UK and China

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Abstract:

China is often accused of manipulating its currency to gain international competitiveness. Previous studies have tried to address this issue by investigating the impact of yuan depreciation on China’s trade balance. Not only have they failed to establish the link between the Chinese exchange rate and its trade balance with the rest of the world but also between China and her major trading partners. In this article, we consider the China–UK trade balance and disaggregate their trade flows by commodity. Out of the 47 industries considered, we show that the real depreciation has favourable short-run effects in most industries. However, the short-run effects last into the long run only in seven cases.

Keywords: China; F14; F31; UK; industry trade; the J-curve

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036846.2013.783680

Affiliations: The Department of Economics, The Center for Research on International Economics, The University of Wisconsin-Milwaukee, Milwaukee, WI, 53201, USA

Publication date: November 1, 2013

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