Impact of China's Real Exchange Rate Volatility on Sino-US Commodity Trade

摘要

Constructing the imperfect substitute trade models of commodity goods between USA and China, this paper uses FGLS and GMM estimation to show whether fluctuation of the real China's exchange rate has any implication on the Sino-US commodity trade flows. Using two alternative measures of "real" China's exchange rates are discussed, export and import trade flows of 9 industries under 1-digit-SITC-category, we find the fluctuation of China's real effective exchange rate has significant impact on both export and import trade between two countries, however, the fluctuation of China's real exchange rate of Sino-US has no influence on it. The conclusion is China should maintain and loose the fluctuation in limited floating range to improve the structure and balance of international trade.