Renminbi depreciations and Japan-China commodity trade: do manufactured goods show stronger support for the S-curve?. (1st January 2011) - Bahmani-Oskooee, Mohsen
Because consumer prices and trade quantities tend to exhibit stronger rigidities than do nominal exchange rates, trade balances usually respond to currency appreciations and depreciations only after a time lag. This dynamic adjustment – depicted as correlations between deviations in a country pair's real exchange rate and their bilateral trade balance – is known as the 'S curve'. In this study, we evaluate this phenomenon for trade between China and Japan in 73 individual industries. We find that 26 of these commodities conform to the S-curve, and that certain categories of manufactures are more likely to do so than are other commodities.