Sensitivity of bilateral trade between Korea and China to exchange rate fluctuations: Insights from the semiconductor industry

Abstract

AbstractThis study delves into the impact of exchange rate fluctuations on the bilateral semiconductor trade between Korea and China. We present compelling evidence emphasising the significant role of exchange rate changes in Korea's semiconductor trade with China, affecting both short‐term and long‐term dynamics. Our analysis also reveals an asymmetrical effect of bilateral exchange rates on Korea's semiconductor trade with China. Specifically, we find that exchange rate asymmetries primarily manifest as a long‐term phenomenon in Korea's semiconductor exports to China. At the same time, they influence both short‐ and long‐term dynamics in Korea's semiconductor imports from China.