Publication

This paper investigates whether a J-curve can be detected in the time series data on China's bilateral trade with the G-7 countries - Canada, France, Germany, Italy, Japan, United Kingdom and the US. The authors employ cointegration and causality tests to determine long-run and the short-run links between the real exchange rate, national income, and trade balance. They provide evidence that a real depreciation will eventually improve China's trade balance with some countries. The paper concludes that there is no indication of a negative short-run response, which characterizes the J-curve.