Sentences in BTN Essay Example | Topics and Well Written Essays - 250 words

Sentences in BTN - Essay Example A Chinese firm is used for analysis to determine if the exchange rates affect trade flows in a systematic manner. It is beyond the analysis of this paper to compare the responses of the foreign country policies to the domestic policies that existed initially China maintained a fixed exchange rate from 1994 to 2005 and during this period the USA experienced continued and increasing deficits in trade against China. Domestic Chinese firms obtained raw materials from the foreign trading partner freely without making payments. The firm would then sell the product to the same foreign trading partner and charges the trading partner only the assemblage fee. Ordinary exports and imports formed the main basis of the analysis as they accounted for the majority of the exports and the imports. The share of each of the processing firm is used as a determinant of the level of processing trade engagement of the given firm during the analysis The effects of the firm level dynamics on the aggregate ch ina-us trade balance is examined using beard formula of decomposing the annual changes in exports and imports between the two countries. Percentage changes in the GDP of China and USA are used to control the effects on the demands on firm exports and imports. Firm fixed effects are used in the control of any unique feature that may affect the exports or imports at the firm level hence errors are standardized at the firm level