Exchange Rate and Purchasing Power Parity in China Soybean Trading to USA, Argentina, and Brazil, 1999-2010
27 Pages Posted: 4 Dec 2015
Date Written: December 15, 2011
This article researches fluctuation of exchange rate has impacts on China import unit price of soybeans trading to USA, Argentina, and Brazil. Based on yearly and monthly bilateral soybeans trade data from 1999 to 2010, empirical results show that exchange rate is statistically significant to China import soybeans unit price changes in either a long run or a short run. Although dollar value of USA currency depreciation has negative impact on the exporting amount of USA soybeans, the pattern of trade in dollar values did not shift from 1999 to 2010 no matter how international trade organizations influence on trading coordination. Empirical analysis based on monthly USA-China bilateral soybeans trade data from 1999 to 2010 indicates that the volatility of the exchange rate faces a declining trend that may trigger threshold effect on China import unit price changes. Thus, trading large amount of heavy goods to China in a short period can consolidate purchasing power parity of dollar value of USA currency and affect Argentina and Brazil exporting unit price and world price changes even if it faces to a declining trend.
Keywords: China, exchange rate, Purchasing Power Parity (PPP), soybeans, threshold effect
JEL Classification: F12, F31, Q17
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