Do Traditional Models or the Dominant Currency Paradigm Explain China’s Export Behavior?
Year: 2026
Type: article
Abstract: Traditional models indicate that appreciations of the exporting country’s currency relative to the importing country’s currency decrease exports. The dominant currency paradigm (DCP) holds that, since so much trade is invoiced in U.S. dollars (USD), changes in the importing country’s currency relative to the USD rather than relative to the exporting country’s currency affect trade. We investigate these hypotheses for China, the world’s largest exporter. The results indicate that both traditional models and the DCP framework help explain China’s exports over the 1995–2018 period. When focusing on the 1995–2008 period when USD invoicing was strongest, we find that the bilateral RMB exchange rate has explanatory power but the importing country’s currency relative to the USD has less explanatory power. These findings hold for aggregate exports and for individual categories such as computers and textiles.
Source: Economies
Authors: Willem Thorbecke, Chen Chen, Nimesh Salike
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $2,172
OpenAlex ID: W7204909261