The effect of foreign exchange volatility on trade: evidence from China
Date
2016
Authors
Wang, Qi
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Abstract
Does the volatility of the Renminbi (RMB) have any significant impact on China’s trade? This fundamental question has garnered considerable debate in both the academic and financial circles. The recent “currency wars” amongst larger economies has further fueled the question. Using a number of econometric methods, this research dissects the heart of the effect of the volatility of exchange rate on trade. The research makes crucial findings to provide an affirmative response to the central question posed. In line with most theoretical and empirical studies, the study found that volatility of exchange rate has a positive impact on trade by boosting exports and reducing imports. The appreciation of the RMB has tended to lead to a decrease in China’s global competitiveness, and often suppresses growth. The research provides an important insight on how Chinese monetary authorities can maintain the managed pegged currency system while simultaneously expanding economic growth.
Key words: Exchange rate volatility; trade balance; imports; exports; causality; appreciation; depreciation.
Description
Master Thesis Paper
Submitted to: Wits Business School University of the Witwatersrand Johannesburg, South Africa
Master in Finance & Investment, 2015
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Citation
Wang, Qi (2016) The effect of foreign exchange volatility on trade: evidence from China, University of the Witwatersrand, <http://wiredspace.wits.ac.za/handle/10539/21500>