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Purpose
Impact of currency depreciation or devaluation on the trade balance is not instantaneous. Indeed, because of adjustment lags favorable effects of depreciation is only realized in the future. This short‐run dynamics of the trade balance is summarized by the S‐Curve phenomenon. The purpose of this paper is to test this phenomenon by using commodity level data between China and Germany.
Design/methodology/approach
The methodology is based on cross‐correlation function.
Findings
Out of 62 industries studied, only 22 support the S‐Curve or enjoy improvement in their trade balance in the future. The list included small and large industries as well as durable and non‐durable goods.
Originality/value
No study in the literature has considered commodity level trade between China and Germany.
Keywords:
China,
Germany,
Commodity markets,
Depreciation,
Foreign exchange,
Trade balances,
S‐Curve,
Industry data
© Emerald Group Publishing Limited
2012
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