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Impacts of RMB devaluation on China’s trade balances: a time-varying SVAR approach

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  • Wongi Kim

Abstract

In this article, I empirically examine time-varying effects of real renminbi (RMB) devaluation on China’s trade balances. To this end, I estimate a time-varying structural vector autoregression model with monthly data. Results demonstrated that effects of real RMB devaluation on China’s trade balances are time varying. In a few months after devaluation of RMB, trade balances worsen as predicted in J-curve theory in most sample periods. However, subsequent improvements of trade balances predicted in J-curve theory appear only in certain periods, particularly in 2000s. Finally, devaluation of RMB positively affects China’s GDP and OECD industrial production, although the size of effects varies across sample periods. Joining WTO, the global financial crisis and endogenous feedbacks induced by price effects seem to be important to understand these time-varying patterns.

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  • Wongi Kim, 2020. "Impacts of RMB devaluation on China’s trade balances: a time-varying SVAR approach," Applied Economics, Taylor & Francis Journals, vol. 52(45), pages 4952-4966, September.
    • Handle: RePEc:taf:applec:v:52:y:2020:i:45:p:4952-4966
    DOI: 10.1080/00036846.2020.1751801
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    Cited by:

    1. Huachen Li & Tiezheng Song, 2024. "Regime dependent dynamics of parallel and official exchange markets in China: evidence from cryptocurrency," Applied Economics, Taylor & Francis Journals, vol. 56(41), pages 4952-4973, September.

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