AN ESTIMATION OF CHINESE RENMINBI EXCHANGE RATE IMPACT ON THE REAL EXPORTS OF INDONESIA TO THE US: IS THERE A J-CURVE?

Diyah Putriani

Abstract


This paper seeks whether a J-Curve exists on the impact of changes in the Chinese Renminbi (RMB) exchange rates on bilateral exports of Indonesia to the United States (US), particularly in the long run. The Johansen cointegration procedures and Vector Error Correction Model (VECM) regression are applied. The cointegration test shows that there are long-term relationships amongst real GDP of US, Indonesian Rupiah (IDR), real exchange rates and volatility, and Chinese RMB real exchange rates. The result shows that the RMB exchange rate has a negative significant impact (substitution relationship) on Indonesian export to the US. The result also suggests a dissatisfaction of the Marshall-Lerner condition indicating the J-curve phenomenon does not exist.


Keywords


RMB, Marshall-Lerner Condition, J-Curve, Johansen Cointegration, VECM

Full Text:

PDF

References


Arize, A and Osang, T. (2000). Exchange rate volatility and foreign trade: Evidence from thirteen LDC’s. Journal of Busssines and Economic Statistics. Vol.18, No.1:10-17.

Aswicahyono, H. and Pangestu, M., (2000). Indonesia’s recovery: export and regaining competitiveness. The Developing Economies 38 (4): 454-89.

Athukorala, P. and Yamashita, N (2006). Production fragmentation and trade integration: East Asia in a global context. North American Journal of Economic and Finance, 17(3): 233-256.

Baak, S. (2005). The bilateral real exchange rates and trade between China and The U.S. Unpublished Manuscript. Department of Economics. Waseda University.

Baak, S. (2006). The Impact of The Chinese renminbi on the exports of Korea and Japan to The U.S. Unpublished Manuscript. Department of Economics. Waseda University.

Baak, S. (2007). The effect of the Chinese renminbi on Korean export to Japan. The Journal of Econometric Study of Northeast Asia. Vol. 6, No. 1: 103-112

Bloom, D, Caning, E D, Hu, L, Liu, Y, Mahal, A, and Yip, W (2006), Why has China’s economy taken off faster than India’s. Paper presented at the 2006 PAN Asia Conference, Stanford University, http://scid.stanford.edu/events/PanAsia/Papers/Bloom.pdf .

Cable, V and Ferdinand, P. (1994). China As an Economic Giant: Threat or Opportunity? Royal Institute of International Affairs 1944. Vol. 70, No. 2 (Apr., 1994), pp. 243-261

Das, D. K., (2006). China and India A tale of two economies, New York: Routledge.

Direction of Trade Statistics. Http:// www.elibrary-data.imf.org

Fouquin, M., D. Hiratsuka and F. Kimura, (2006). Introduction: East Asia’s de facto economic integration. In Hiratsuka, Daisuke (ed.), East Asia’s De Facto Economic Integration. New York: Palgrave Macmillan. pp. 1-15.

Funke, M and Rahn, J (2004). Just how undervalued is the Chinese renminbi? World Economy, Vol. 28, No.4: 456-487

Gaulier, G., Lemoine, F., Kesenci, D.Ü., (2006).China’s specialization in East Asian production sharing, in Hiratsuka, D. (ed), East Asia’s De Facto Economic Integration. New York: Palgrave Macmillan. 135-180.

Goldstein, M and Lardy, N. (2006) .China's Exchange Rate Policy Dilemma. The American Economic Review, Vol. 96, No. 2 (May, 2006), pp. 422-426.

Gujarati, D. (2003). Basic Econometrics. Fouth Edition. New Jersey: Mc Graw Hill.

Hummels, D., Ishii, J., and Yi, K., (2001).The nature and growth of vertical specialization in world trade. Journal of International Economics, 54(1):75-96.

Husman, J. A. (2005). Pengaruh Nilai Tukar Riil Terhadap Neraca Perdagangan Bilateral Indonesia: Kondisi Marshall-Lerner dan Fenomena J-Curve. Buletin Ekonomi Moneter dan Perbankan. December 2005.

International Financial Statistics. Http:// www.elibrary-data.imf.org

Ishihara, K. (1993). China’s Conversion to a Market Economy. IDE Occasional Papers Series No. 28. Tokyo: IDE.

Jamilov, R. (2010). J-Curve Dynamics and the Marshall-Lerner Condition: Evidence from Azerbaijan. Unpublished manuscript. Available from URL: http://www.mpra.ub.uni-munchen.de/36799/

Kapoor, A. G. and Ramakrishnan, U. (1999). Is there A J-Curve? A New Estimation for Japan. International Economic Journal. Vol. 13. No.4. Winter1999.

Kwan, C. H, (2002). The rise of China and Asia’s flying-geese pattern of economic development: an empirical analysis based on US import statistics. Nomura Research Institute (NRI) Paper No. 52. [Online; cited 5 November 2006]. Available from URL:

https://www.nri.co.jp/english/opinion/papers/2002/pdf/np200252.pdf.

National Bureau of Statistics of China. Http://www.stats.gov.cn/english/

Ng, F and Yeats, A., (2003). Major trade trends in East Asia: what are their implications for regional cooperation and growth? Policy Research Working Paper. The World Bank, Development Research Group Trade, June. Available from URL: http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2003/07/26/000094946_03071704242197/Rendered/PDF/multi0page.pdf.

Panagariya, A, (2006). “India and China: trade and foreign investment”. Paper Presented at ‘Pan Asia 2006’ Conference, Stanford Center for International Development, http://scid.stanford.edu/events/PanAsia/Papers/Panagariya.pdf

Putriani, D. (2010). Dampak Renminbi Cina terhadap Ekspor Bilateral ASEAN5 ke Amerika Serikat. Undergraduate thesis. Faculty of Economics and Business. Universitas Gadjah Mada, Indonesia. Unpublished.

Rawski, T. (2009). China’s economy and global interactions in the long run. Discussion Paper No.53. United Kingdom: China Policy Institute of Nottingham University. Http://www.chinapolicyinstitute.org.

Srinivasan, T.N., (2006). China, India and the world economy. Working Paper No. 286, Stanford Center for International Development, July, http://scid.stanford.edu/pdf/SCID286.pdf .

Teh Jr, Robert R. (1999). The effects of a renminbi devaluation on ASEAN economies: An applied general equilibrium approach. Presented at The China-ASEAN Research Institutes Roundtable University Of Hong Kong. Hong Kong: 16-18 September 1999. Http://www.aseansec.org/2826.Htm

Widarjono, A. (2005). The impact of real exchange rate and trade balance. Jurnal Ekonomi dan Bisnis Indonesia. Vol.20. No.3: 239-249.

Widodo, T. (2008). Shifts in pattern of specialization”. Gadjah Mada International Journal of Business. January-April. Vol.10. No.1: 47-75

Widodo, T and Putriani, D. (2011). RMB Devaluation: Does It Reduce The Bilateral Exports Volume of Indonesia to the Four Selected Major Trading Countries. Paper presented at The "5th Annual Workshop, the Dynamics of Capital Flows and the Currency Competitiveness", October 12, 2011. Bulletin of Monetary Economics and Banking. The Central Bank of Indonesia

World Bank, (2006). World Development Indicators. Washington D.C.: World Bank.

World Bank, (1993). The East Asian Miracle: Economic Growth and Public Policy. Washington, D.C.: The World Bank.

Yamazawa, I dan Imai K.. (2001). China Enters WTO: Pursuing Symbiosis with the Global Economy. Jepang: IDE JETRO.




DOI: http://dx.doi.org/10.21776/ub.jiae.2016.006.02.4

Refbacks

  • There are currently no refbacks.