THE ROLE OF EXCHANGE RATE IN SINO-U.S. BILATERAL TRADE |
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| Authors: | WON W. KOO RENAN ZHUANG |
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| Affiliation: | Koo:;Chamber of Commerce Distinguished Professor and Director, Center for Agricultural Policy and Trade Studies, Department of Agribusiness and Applied Economics, North Dakota State University, Fargo, ND 58105. Phone 1-701-231-7448, Fax 1-701-231-7400, E-mail Zhuang:;Research Assistant Professor, Center for Agricultural Policy and Trade Studies, Department of Agribusiness and Applied Economics, North Dakota State University, Fargo, ND 58105. Phone 1-701-231-8993, Fax 1-701-231-7400, E-mail . |
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| 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. ( JEL F14, F10, F19) |
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