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Should Chinese Renminbi be Blamed for Its Trade Surplus? A Structural VAR Approach
Author(s) -
Zhang Zhaoyong,
Sato Kiyotaka
Publication year - 2012
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2012.01438.x
Subject(s) - renminbi , balance of trade , economics , devaluation , exchange rate , china , structural vector autoregression , vector autoregression , effective exchange rate , international economics , current account , balance (ability) , monetary economics , international trade , monetary policy , law , political science , medicine , physical medicine and rehabilitation
During the recent years, the Renminbi (RMB) exchange rate issue has been at the centre of ongoing debate over the source of global current account imbalance, especially with the United States. The objective of this study is to contribute to the current discussion by providing some new evidence on China’s exchange rate policy and the impacts of RMB devaluation/revaluation on China’s trade balance using a structural vector autoregression (VAR) approach. The results indicate that the dynamic effect of exchange rate on China’s trade balance is still very limited and China’s balance of trade is mainly determined by the world demand and its trade performance, with the latter being a result of its successfully maintained comparative advantage.