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Empirical Estimates for how Changes in China¡¯s Foreign Reserves Are Hurting Chinese Exports and Helping US Exports

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  • Jonathan E. Leightner

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.

Suggested Citation

  • Jonathan E. Leightner, 2018. "Empirical Estimates for how Changes in China¡¯s Foreign Reserves Are Hurting Chinese Exports and Helping US Exports," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 9(2), pages 55-63, April.
    • Handle: RePEc:jfr:ijfr11:v:9:y:2018:i:2:p:55-63
    DOI: 10.5430/ijfr.v9n2p55
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    References listed on IDEAS

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    1. Leightner, Jonathan E. & Inoue, Tomoo, 2007. "Tackling the omitted variables problem without the strong assumptions of proxies," European Journal of Operational Research, Elsevier, vol. 178(3), pages 819-840, May.
    2. Jonathan Leightner, 2005. "The Productivity of Government Spending in Asia: 1983–2000," Journal of Productivity Analysis, Springer, vol. 23(1), pages 33-46, January.
    3. Jonathan E. Leightner, 2007. "Omitted Variables, Confidence Intervals, And The Productivity Of Exchange Rates," Pacific Economic Review, Wiley Blackwell, vol. 12(1), pages 15-45, February.
    4. Jonathan Leightner & Tomoo Inoue, 2009. "Negative fiscal multipliers exceed positive multipliers during Japanese deflation," Applied Economics Letters, Taylor & Francis Journals, vol. 16(15), pages 1523-1527.
    Full references (including those not matched with items on IDEAS)

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