Empirical estimates for how changes in China's Foreign reserves are hurting chinese exports and helping US exports

Research output: Contribution to journalArticle

Abstract

This paper estimates the change in China's exports and the change in US exports due to a one dollar increase in China's foreign reserves. The statistical technique used produces reduced form estimates that capture the influence of omitted variables without having to construct and estimate complex structural models. I find that in August 2000 China's accumulation of 621 million dollars of foreign reserves is correlated with China's exports increasing by 151 million and the US's exports falling by 628 million dollars. In contrast, in November 2016, China spending 69 billion dollars of its foreign reserves supporting the value of the yuan is correlated with China's exports falling by 4.77 billion and the US's exports rising by 2.42 billion. Donald Trump's accusation that China is suppressing the yuan exchange rate to help Chinese exports at the expense of US exports did not fit the facts between August 11, 2015 and December 31, 2016.

Original languageEnglish (US)
Pages (from-to)55-63
Number of pages9
JournalInternational Journal of Financial Research
Volume9
Issue number2
DOIs
StatePublished - Apr 1 2018

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Foreign reserves
China
China's export
Structural model
Exchange rates
Reduced form
Expenses
Omitted variables

Keywords

  • China's trade surplus
  • Currency manipulation
  • Fixed exchange rates
  • The US's trade deficit

ASJC Scopus subject areas

  • Business and International Management
  • Accounting
  • Economics, Econometrics and Finance (miscellaneous)

Cite this

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