S-Curve dynamics of trade between US and China

A newly emerging area in international economics looks at the cross-correlation coefficient between past and future values of the trade balance and movement in the current exchange rate as a way of analyzing the response of the trade balance to exchange rate changes. Since the cross-correlation function follows a symmetric pattern, it comes under the heading of the S-Curve. Previous studies have considered the experience of developed and developing countries with the S-Curve, excluding China. In this paper we consider the Chinese experience. We show that when aggregate trade data between China and the U.S. are considered, there is no evidence of the S-Curve. However, when the data are disaggregated by commodity, the S-Curve is supported in almost 50% of the close to 100 industries considered. Furthermore, it appears that commodity types do not have any influence in determining the existence of an S-Curve pattern. (C) 2009 Elsevier Inc. All rights reserved.