The Role of Exchange Rate in Sino-U.S. Bilateral Trade

12 Pages Posted: 21 Jun 2007

See all articles by Won W. Koo

Won W. Koo

North Dakota State University

Renan Zhuang

North Dakota State University - Department of Agribusiness and Applied Economics

Abstract

We use the error component two-stage least squares estimation method to examine the effects of the Sino-U.S. exchange rate and the weighted exchange rate between the United States and other Asian countries on the Sino-U.S. trade patterns. Our study suggests that both the exchange rates have contributed to China's increased trade surplus with the United States. China has imported intermediate goods from the Asian countries, produced final goods using its cheap labor, and exported those goods to the United States. This is especially true for bilateral trade of high-tech manufacturing goods. Our study also reveals that the U.S. bilateral trade balance could improve if China appreciates its currency (Yuan) against the U.S. dollar.

Suggested Citation

Koo, Won W. and Zhuang, Renan, The Role of Exchange Rate in Sino-U.S. Bilateral Trade. Contemporary Economic Policy, Vol. 25, No. 3, pp. 362-373, July 2007, Available at SSRN: https://ssrn.com/abstract=993981 or http://dx.doi.org/10.1111/j.1465-7287.2006.00046.x

Won W. Koo (Contact Author)

North Dakota State University ( email )

Morrill 209B
Fargo, ND 58105
United States
701-231-7448 (Phone)
701-231-7400 (Fax)

Renan Zhuang

North Dakota State University - Department of Agribusiness and Applied Economics ( email )

Fargo, ND 58105
United States

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