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Assessing China's exchange rate regime

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Author Info
Jeffrey A. Frankel
Shang-Jin Wei

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Abstract

"The IMF Articles of Agreement forbid a country from manipulating its currency for unfair advantage. The US Treasury has been legally required since 1988 to report to Congress biannually regarding whether individual trading partners are guilty of manipulation. One part of this paper tests econometrically two competing sets of hypothesized determinants of the Treasury decisions: (1) legitimate economic variables consistent with the IMF definition of manipulation - the partners' overall current account/GDP, its reserve changes and the real overvaluation of its currency, and (2) variables suggestive of domestic American political expediency - the bilateral trade balance, US unemployment and an election year dummy. The econometric results suggest that the Treasury verdicts are driven heavily by the US bilateral deficit, though other variables also turn out to be quite important." Copyright (c) CEPR, CES, MSH, 2007.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0327.2007.00185.x
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Publisher Info
Article provided by CEPR, CES, MSH in its journal Economic Policy.

Volume (Year): 22 (2007)
Issue (Month): (07)
Pages: 575-627
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Handle: RePEc:bla:ecpoli:v:22:y:2007:i::p:575-627

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Jeffrey Frankel, 2006. "On the Yuan: The Choice between Adjustment under a Fixed Exchange Rate and Adjustment under a Flexible Rate," CESifo Economic Studies, Oxford University Press, vol. 52(2), pages 246-275, June. [Downloadable!] (restricted)
  2. Noland, Marcus, 1997. "Chasing Phantoms: The Political Economy of USTR," International Organization, MIT Press, vol. 51(3), pages 365-87, Summer.
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  3. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May. [Downloadable!] (restricted)
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  4. Morris Goldstein, 2004. "Adjusting China's Exchange Rate Policies," Peterson Institute Working Paper Series WP04-1, Peterson Institute for International Economics. [Downloadable!]
  5. Ronald McKinnon & Gunther Schnabl, 2004. "The Return to Soft Dollar Pegging in East Asia. Mitigating Conflicted Virtue," International Finance 0406007, EconWPA, revised 07 Jul 2004. [Downloadable!]
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  6. Jeffrey A. Frankel and Shang-Jin Wei., 1993. "Emerging Currency Blocs," Center for International and Development Economics Research (CIDER) Working Papers C93-026, University of California at Berkeley.
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  7. Benassy-Quere, Agnes & Coeure, Benoit & Mignon, Valerie, 2006. "On the identification of de facto currency pegs," Journal of the Japanese and International Economies, Elsevier, vol. 20(1), pages 112-127, March. [Downloadable!] (restricted)
  8. Wei, S.J. & Frankel, J.A., 1992. "Yen Bloc or Dollar Bloc: Exchange Rate Policies of the East Asian Economies," Papers 92-08, University of Birmingham - International Financial Group.
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  9. Jay C. Shambaugh, 2004. "The Effect of Fixed Exchange Rates on Monetary Policy," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 300-351, February. [Downloadable!] (restricted)
  10. Jeffrey A. Frankel, 1992. "Liberalization of Korea's foreign exchange markets," Pacific Basin Working Paper Series 92-08, Federal Reserve Bank of San Francisco.
  11. Morris Goldstein & Nicholas R. Lardy, 2005. "China's Role in the Revived Bretton Woods System: A Case of Mistaken Identity," Peterson Institute Working Paper Series WP05-2, Peterson Institute for International Economics. [Downloadable!]
  12. Jeffrey Frankel & Sergio Schmukler & Luis Serven, 2000. "Verifiability and the Vanishing Intermediate Exchange Rate Regime," NBER Working Papers 7901, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Frankel, Jeffrey, 2006. "Global Imbalances and Low Interest Rates: An Equilibrium Model vs. A Disequilibrium Reality," Working Paper Series rwp06-035, Harvard University, John F. Kennedy School of Government. [Downloadable!]
  14. Jeffrey A. Frankel., 1993. "Foreign Exchange Policy, Monetary Policy and Capital Market Liberalization in Korea," Center for International and Development Economics Research (CIDER) Working Papers C93-008, University of California at Berkeley.
  15. Jeffrey A. Frankel., 1993. "Is Japan Creating a Yen Bloc in East Asia and the Pacific?," Center for International and Development Economics Research (CIDER) Working Papers C93-007, University of California at Berkeley.
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  16. Nouriel Roubini, 2007. "Why China Should Abandon Its Dollar Peg," International Finance, Blackwell Publishing, vol. 10(1), pages 71-89, 03. [Downloadable!] (restricted)
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  1. Jeffrey A. Frankel & Shang-Jin Wei, 2008. "Estimation of De Facto Exchange Rate Regimes: Synthesis of the Techniques for Inferring Flexibility and Basket Weights," NBER Working Papers 14016, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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