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International trade includes trade not just in goods but also in services. Introduction of internet technology has helped to boost trade in services by more than trade in goods. What has been the role of the exchange rate in this journey? While many studies have investigated the link between the exchange rate and trade in goods, only three studies in the literature have assessed the impact of exchange rate changes on trade in services. Two have used data from the U.S., and one from China. We add to this new emerging literature by assessing the symmetric and asymmetric effects of changes in the real effective exchange rate of the Korean won on Korean trade in 10 service categories with the rest of the world. Considering the symmetric (linear) models and asymmetric (nonlinear) models to be complementary, we find short-run effects of imports and exports of almost all 10 service industries. Short-run effects translate into the long run in little over 50% of industries. These findings did not change significantly when we considered real trade in services versus nominal trade. Our findings were industry-specific. [ABSTRACT FROM AUTHOR]

Almost all studies that tested the J-curve phenomenon, used trade data in only goods. Trade in service has received no attention until recently when one study tested the symmetric and asymmetric J-curve hypothesis using financial and insurance service data between the U.S. and its major partners. In this paper we add to this new literature by testing the symmetric and asymmetric J-curve effect using China's service trade with rest of the world. We find support for the J-curve effect in six out of 12 service industries, symmetric in some and asymmetric in some others. [ABSTRACT FROM AUTHOR]

One previous study that estimated the demand for money in China, included output volatility and money supply volatility as two measures of uncertainty. The study found their effects to be transitory in the short-run but not in the long-run. We suspect that the lack of long-run effects could be due to both uncertainty measures being less comprehensive. When we replaced the two measures with a relatively more comprehensive measure known as policy uncertainty, we too found only short-run effects. However, when we separated increased uncertainty from declines and engaged in asymmetric analysis by estimating a nonlinear money demand function, we found that in the long run while increased uncertainty has a significant effect on the demand for money, decreased uncertainty does not. Our findings indicated that in China, as uncertainty increases people prefer to hold more cash. [ABSTRACT FROM AUTHOR]

A few studies that have assessed the impact of economic policy uncertainty on trade flows, have used aggregate trade flows in a panel model. In this paper, we reduce aggregation bias by considering the response of each of the 87 industries in the trade between the U.S. and China to economic policy uncertainty in both countries. While we find significant short-run effects of both uncertainty measures in almost 55% of the U.S. exporting to and importing industries from China, short-run effects lasted into significant long-run effects in a limited number of large and small industries. More precisely, we found U.S. policy uncertainty to have negative long-run effects in 36 exporting industries with an export share of 43% and 25 importing industries with an import share of 11%. By contrast, we found China's economic policy uncertainty to have positive long-run effects on the U.S. exports of 19 industries with an export share of 18% and on the U.S. imports of 24 industries with an import share of 13.5%. Clearly, increased tension between these two countries that contribute to increased uncertainty will hurt the trade balance of both countries. [ABSTRACT FROM AUTHOR]

Nearly all studies in the literature have assessed the impact of exchange rate changes on trade flows for goods. Service industries, however, have not received much attention. Two studies have assessed the effects of exchange rate changes on U.S. service trade with its partners. We add to this literature with a new study that assesses the symmetric and asymmetric effects of changes in the real effective rate of the yuan on China's trade in 11 service industries with the world. While we find short-run effects on imports and exports for almost all service categories, short-run effects last into long-run asymmetric effects in six Chinese importing service industries and eight Chinese exporting service industries. [ABSTRACT FROM AUTHOR]

Following recent advances in asymmetric impact of exchange rate volatility on trade flows, we assess the symmetric and asymmetric effects of exchange rate volatility on China's bilateral trade with each of its 21 trading partners. We find symmetric effects in only a few bilateral trade models. However, the asymmetric analysis which required using nonlinear models revealed short-run asymmetric effects in almost all export and import demand models and log-run significant asymmetric effects in 50% of the models. In almost all models, while increased volatility was found to hurt Chinese trade, decreased volatility was found to boost them, implying that stable exchange rate is beneficial for China's trade. [ABSTRACT FROM AUTHOR]

Previous studies that assessed the impact of exchange rate volatility on Chinese trade flows reported mixed findings. They all have assumed that the effects are symmetric. In this paper, we investigate the possibility of asymmetric effects of the real yuan–dollar volatility on the trade flows of 84 2‐digit industries that trade between the two countries. We show that estimating asymmetric and nonlinear models for each industry yields much more significant outcomes than estimating symmetric and linear models. We find that trade flows of 2/3rd of industries are affected asymmetrically in the short run. Short‐run effects last into asymmetric adverse long‐run effects in 35 U.S. exporting industries (with export share of 45%) to China and in 44 Chinese exporting industries (with 76% export share) to the U.S. Since increased volatility hurts a significant share of both countries' exports, a stable yuan–dollar rate as well as inflation rate will benefit both countries in the long run. [ABSTRACT FROM AUTHOR]

A country devalues or allows its currency to depreciate so that it can export more and increase its inpayments and import less to reduce its outpayments. Since exchange rate changes work through affecting traded goods prices and since there is evidence that prices adjust to exchange rate changes in an asymmetric manner, we conjecture that China's inpayments from trading partners and its outpayments to trading partners also adjust asymmetrically to exchange rate changes. Since estimating asymmetric effects of exchange rate changes requires using nonlinear models, such models yield much more significant results than the traditional linear models. Indeed, this is the case in the trade between China and its 21 major trading partners. [ABSTRACT FROM AUTHOR]

Our goal in this paper is to assess short-run and long-run effects of the real yuan-pound rate volatility on the U.K. exports to China and Chinese exports to the U.K. When a linear export model was estimated for each of the 70 industries, we found short-run effects on 43 (53) British (Chinese) exporting industries to China (the U.K.) and which lasted into the long run in 17 (28) British (Chinese) industries. However, when a nonlinear model was estimated, we found short-run asymmetric effects on 58 (67) British (Chinese) exporting industries that lasted into the long in 42 (52) British (Chinese) industries, mostly in an asymmetric manner. Our findings were industry specific but in general, while increased exchange rate volatility hurt British export to China in most industries, it actually boosted Chinese exports to the U.K., in most industries. On the other hand, decreased volatility boosted exports of some British industries, but it hurt exports of some Chinese exporting industries. [ABSTRACT FROM AUTHOR]

The J-curve is a term used to describe short-run deterioration in the trade balance combined with long-run improvement subsequent to a currency devaluation or depreciation. While the majority of studies have tested the symmetric J-curve concept, the new direction is to test for an asymmetric J-curve. We tested both concepts for each of the 21 two-digit industries that trade between Pakistan and its major partner, China. While we found support for the symmetric J-curve in only six industries, we found support for the asymmetric J-curve in 13 industries. The two largest industries, coded 71 (machinery other than electric with 21.14% trade share) and 72 (electrical machinery, apparatus, and appliances with 16.87% trade share) were found to be in the list. [ABSTRACT FROM AUTHOR]

Using monthly data over the period 2010M1-2018M12 we investigate the impact of the real yuna-pound rate on the trade balance of each of the 68 2-digit industries that trade between Britain and China. When a linear ARDL model was estimated, we found short-run symmetric effects in the trade balance of 45 industries that lasted into the long run only in 24 industries. Comparable numbers from the estimates of the nonlinear model were 64 and 39, respectively. The symmetric (asymmetric) J-curve effect received support in 17 (19) industries from the linear (nonlinear) model. Although the increase from the symmetric to asymmetric J-curve effect was not substantial, for the largest industry, i.e., industry coded 85 (Electrical machinery and equipment with 19.56% share of trade), while the symmetric J-curve was not supported, the asymmetric J-curve was. This highlights the significance of the nonlinear adjustment of the yuan-pound exchange rate. [ABSTRACT FROM AUTHOR]

This paper follows a non‐linear ARDL error‐correction approach to examine the presence of the J‐curve in the commodity‐level trade between the United States and China. The analysis disaggregates the US–China trade flows by commodities and separately examines the trade balance responses of 97 commodities to the changes in the real yuan–US$ exchange rates. The analysis at the commodity level alleviates potential aggregation bias that is present in earlier studies offering little evidence for long‐run asymmetric effects of exchange rate on the China–US trade balance. We find strong support for short‐run asymmetric effects in the case of two‐third of the commodities, whereas significant long‐run asymmetric effects are present in the case of one‐third of the commodities including those commodities which command large shares in the China–US trade. [ABSTRACT FROM AUTHOR]

China is now Thailand's largest trading partner and 15% of Thailand's total trade with the world belongs to China. A previous study that assessed the asymmetric effects of the real baht-yuan rate on the bilateral trade balance between the two countries found that a real depreciation of the baht against Yuan has a worsening effect in the long run. We disaggregate the two countries' trade by industry and consider trade balance of each of the 45 industries that trade between Thailand and China. When we estimated a linear model, we found no favorable effects of baht depreciation in any industry. However, when a nonlinear model was estimated, we found significant short-run cumulative or impact asymmetric effects in 27 industries and significant long-run asymmetric effects in 15 industries. Additional analysis revealed that four industries will benefit from baht depreciation and six will be hurt from baht appreciation, supporting a new definition of the asymmetric J-curve in a total of 10 industries. [ABSTRACT FROM AUTHOR]

This article follows the nonlinear Autoregressive Distributed Lag (ARDL) error-correction methodology to explore nonlinearity in the relationship between the trade balances and the real exchange rates for China and its 21 partners. We find evidence for short-run asymmetric effects of exchange rate in cases of 18 partners, short-run adjustment asymmetry in cases of 11 partners, short-run cumulative asymmetry in cases of seven partners, and a significant long-run asymmetric effect cases of five partners. We find support for the “J-curve” that is only due to appreciation or depreciation of the Yuan in cases of five partners, including the U.S. [ABSTRACT FROM AUTHOR]

In order to account for currency substitution, the majority of recent studies relating to the specification of the demand for money include the exchange rate as another determinant of the demand for money. However, those who have estimated the demand for money in China have been unable to find any significant effects of exchange rate changes on the demand for money by the Chinese. We show that this is due to the assumption that exchange rate changes have symmetric effects. Once depreciations are separated from appreciations of the yuan, those exchange rate changes are shown to have significant effects on the demand for money in China, but in an asymmetric manner. [ABSTRACT FROM AUTHOR]

The S-curve phenomenon postulates that while past values of the trade balance and current exchange rates are negatively correlated, future values of the trade balance and current exchange rates are positively correlated. We investigated this pattern between China and the United Kingdom. When we use the bilateral trade flows between the two countries, we find no support for the S-curve. However, when we disaggregate the bilateral trade data by industry and construct the S-curve for 47 industries that trade between the two countries, we find support for the S-curve in 12 cases. These 12 industries, which conduct 30 percent of the trade (including the largest industry), could benefit from currency depreciation. [ABSTRACT FROM AUTHOR]

In an effort to better understand the determinants of trade flows worldwide, researchers have recently incorporated external volatility (in addition to that of the partners’ bilateral exchange rate) into their models. The so‐called ‘third country’ effect is present if adding this term changes the bilateral volatility estimates that are found when external volatility is omitted. This study examines US exports to Hong Kong for 143 industries, and imports from Hong Kong for 110 industries, and finds two key results. First, expected inflation due to Hong Kong's dollar peg leads to increased US exports in a large number of industries. Second, comparing our results with those of a previous study shows strong evidence of a ‘third country’ effect, especially for US imports. Nonparametric tests suggest that these effects differ by sector: for both exports and imports. Manufacturing industries that enjoy a large trade share are less likely to experience this effect once external volatility is incorporated into the analysis. [ABSTRACT FROM PUBLISHER]

This article assesses the impact of the RMB-dollar exchange rate and volatility on U.S. agricultural exports to and imports from China. Two measures of volatility are employed: one based on the moving standard deviation of the real RMB-dollar rate, the other a GARCH-based measure which yields more significant results. We find that exchange rate volatility has a significantly positive long-run effect only on export earnings of the nonagricultural sector. On the other hand, depreciation of the dollar has an expected long-run effect on the import value of the nonagricultural sector and on export earnings of the agricultural sector. No matter which model we consider, the level of economic activity in both countries seems to be the major long-run determinant of trade flows in both directions. [ABSTRACT FROM AUTHOR]

Previous studies that have tested the J-Curve phenomenon for Japan or China employed either aggregate trade data between each country and the rest of the world, or aggregate bilateral data between two trade partners. These studies have found no support for the J-Curve. Suspecting that their models could suffer from aggregation bias, in this paper, we disaggregate bilateral trade flows between the two countries and examine trade by 73 industries. We find evidence of the J-Curve phenomenon in 24 industries, a unique finding for trade between Japan and China. [ABSTRACT FROM AUTHOR]

The impact of exchange rate uncertainty on trade flows is still the center of attention in international economics. A few studies that have looked at this effect in Hong Kong have used either aggregate data between Hong Kong and the rest of the world or between Hong Kong and several of her major trading partners. They have been unable to locate any significant effect. Suspecting that existing studies could suffer from aggregation bias, we concentrate on the trade between Hong Kong and the US and disaggregate their trade flows further by commodity. Out of 140 Hong Kong importing industries and 104 exporting industries considered, we find short-run effects in the majority of the industries. The short-run effects translated into the long run in 81 of Hong Kong import industries and 51 of her export industries, a finding that contradicts previous research. [ABSTRACT FROM PUBLISHER]

Output uncertainty and monetary uncertainty are said to affect the quantity of money demanded in every country. Increases in both measures of uncertainty could induce people to allocate different proportions of their wealth between money and other financial or real assets. We test these hypotheses by using data from China. Empirical results show that both measures of uncertainty have short-run effects on the quantity of money demanded. However, short-run effects do not last into the long term. Similar results were found for the United States in previous research. [ABSTRACT FROM AUTHOR]

Exchange-rate risk is often thought to reduce international trade flows, but numerous theoretical and empirical analyses have pointed toward positive as well as negative effects. This is particularly true when bilateral trade flows for individual industries are estimated. In this study, we extend the literature to the case of Japanese trade with China for 110 import industries and 95 export industries. Aggregate Japanese exports, but not imports, respond to real exchange rate volatility in the long run, while most individual export and import industries respond in the short run. Although many individual Japanese import industries are affected in the long run by risk, mostly negatively, this is even more the case for exporters. A larger proportion of Japanese export industries are affected by exchange rate uncertainty for most industry sectors. Manufacturing exports are particularly vulnerable to this risk, with a large share responding negatively to increased volatility. [ABSTRACT FROM AUTHOR]

Impact of exchange rate uncertainty on trade flows still continues to dominate the literature. Most previous research has used aggregate trade data between one country and the rest of the world or between two countries at a bilateral level. A recent study, however, considered the trade between the U.S. and China at the commodity level, but excluded the 'third-country' effect in its analysis. In this paper, we consider the commodity trade between the U.S. and China one more time and investigate whether volatility of the real U.S. dollar-Canadian dollar has any implication on the trade flows between the U.S. and China. The answer happens to be in the affirmative, though a more significant third-country effect is found in the short run as compared to the long run. [ABSTRACT FROM AUTHOR]

In this paper, when we apply the technique to the bilateral trade balance between the USA and Hong Kong, we find neither short-run nor long-run effects. Suspecting that this could be due to aggregation, we disaggregate the trade data between the two countries by commodity and apply the same method. While we find short-run negative effects in the majority of industries, positive long-run effects are observed in 58 of 108 industries, supporting the J-Curve. [ABSTRACT FROM AUTHOR]

In testing the short-run (J-curve effect) and the long-run effects of currency depreciation on the trade balance many researchers have used either trade data between one country and the rest of the world or between one country and another trading partner. Both groups are said to suffer from aggregation bias. To reduce the bias, in this article we consider trade data between one country (the US) and her trading partner (China) disaggregated by commodity. We use imports and exports of 88 industries (2-digit and 3-digit classifications) and cointegration analysis to show that the trade balance of at least 34 of the industries react favourably to real depreciation of the dollar. The J-curve effect is detected in 22 industries. Furthermore, most of these industries that are sensitive to currency depreciation are durable commodity groupings. [ABSTRACT FROM AUTHOR]

In 1978 when China began her economic reforms of moving toward a free market economy and trade liberalization, the trade balance between China and the United States was in favor of the United States in the magnitude of 600 million dollars. Over the 1978-2002 period, however, it has changed in favor of China such that in 2002 China had a surplus of 120 billion dollars against the United States. Over the same period, the Chinese yuan has depreciated almost fourfold. Is real depreciation of the yuan against the dollar a factor in the trade between the two countries? In this article, we employ data at the industry level (88 two- and three-digit industries) and recent advances in error-correction modeling to show that indeed the real yuan-dollar rate has played a significant role. This contradicts most previous research that used trade data at the aggregate level. [ABSTRACT FROM AUTHOR]

Different authors have tried to estimate the demand for money in different countries. A common theme of almost all studies since 1987 is the application of cointegration technique. The demand for money in China is no exception and has received some attention by researchers. However, finding of cointegration has been interpreted as a sign of constancy of parameter estimates. In this paper we employ CUSUM and CUSUMSQ tests in conjunction with cointegration analysis to show that both M1 and M2 are cointegrated with their determinants. The results of stability tests reveal that while M1 money demand in China is stable, there is some doubt about stability of M2 money demand. [ABSTRACT FROM AUTHOR]

The short-run effects of currency depreciation are said to be different from its long-run effects. In the short run, the trade balance deteriorates and improvement comes after some time; hence, the J-curve phenomenon. Previous studies that tested the response of the trade balance to exchange rate changes in China employed aggregate trade data and provided mixed results. Indeed, most of them concluded that real depreciation has no long-run impact on the Chinese trade balance. In this paper, we disaggregate the data by country and using recent advances in time series modelling estimate a trade balance model between China and her 13 major trading partners. We show that real depreciation of the Chinese currency has a favourable impact on her trade balance with a few partners, especially the USA. Not much support is found for the J-curve hypothesis. [ABSTRACT FROM AUTHOR]