Does Appreciation of the RMB Decrease Imports to the U.S. from China?
31 Pages Posted: 23 Mar 2011
Date Written: November 23, 2010
In 2005, China abated its fixed exchange rate against the U.S. dollar and began to appreciate the Renminbi (RMB). In this paper, I explore the effect of the appreciation of the RMB on imports to the U.S. from China by augmenting the gravity model with the exchange rate. Using an industrial panel data set during the period 2002 to 2008 and controlling for the endogeneity of the bilateral exchange rate, this extensive empirical analysis suggests that the appreciation of the RMB against the U.S. dollar significantly reduced imports to the U.S. from China. This finding is robust to a variety of econometric methods and to coverage in different periods.
Keywords: Exchange Rate, Pass-through, Bilateral Trade, Gravity Model
JEL Classification: F1, F2
Suggested Citation: Suggested Citation