Title: Renminbi depreciations and Japan-China commodity trade: do manufactured goods show stronger support for the S-curve?

Authors: Mohsen Bahmani-Oskooee; Scott W. Hegerty; Jia Xu

Addresses: The Centre for Research on International Economics and Department of Economics, The University of Wisconsin-Milwaukee, Milwaukee, WI 53201, USA. ' Department of Economics and Finance, Richard J. Wehle School of Business, Canisius College, Buffalo, NY 14208, USA. ' Department of Economics, St. Mary's College of Maryland, St. Mary's City, MD 20686, USA

Abstract: Because consumer prices and trade quantities tend to exhibit stronger rigidities than do nominal exchange rates, trade balances usually respond to currency appreciations and depreciations only after a time lag. This dynamic adjustment – depicted as correlations between deviations in a country pair|s real exchange rate and their bilateral trade balance – is known as the |S curve|. In this study, we evaluate this phenomenon for trade between China and Japan in 73 individual industries. We find that 26 of these commodities conform to the S-curve, and that certain categories of manufactures are more likely to do so than are other commodities.

Keywords: S-curve; industry data; China; Japan; renminbi; currency depreciations; money; commodity trade; manufactured goods; consumer prices; trade quantities; commodities; exchange rates; trade balances; currency appreciations; currencies; bilateral trade; public policy.

DOI: 10.1504/IJPP.2011.043559

International Journal of Public Policy, 2011 Vol.7 No.4/5/6, pp.250 - 264

Received: 16 Jan 2011
Accepted: 06 Apr 2011
Published online: 14 Jan 2015 *

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