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This paper studies the impact of RMB nominal exchange rate on Sino-US trade balance. We find that there is a co-integration relationship among Sino-US trade balance, RMB nominal exchange rate, American real income and Chinese real income, and Sino-US trade balance is more sensitive to RMB nominal exchange rate, 1% devaluation in RMB will cause an increase of 5.71% in Sino-US trade balance. We also find that the increase of Chinese real income could not reduce Sino-US trade balance; it is mainly due to Sino-US trade structure. The empirical results show that there is a two-way Granger causality for the American real income and Sino-US trade balance, but there is only one-way Granger causality for RMB nominal exchange rate and Sino-US trade balance, also for Chinese real income and Sino-US trade balance. Sino-US trade balance reflects a longer continuous positive response to RMB nominal exchange rate, that is to say, the RMB devaluation really have a positive impact on Sino-US trade balance, but in our research J-curve effect does not appear. |
