Advanced Search
MyIDEAS: Login to save this article or follow this journal

The costs of rebalancing the China-US co-dependency

Contents:

Author Info

  • Luigi Bonatti

    ()

  • Andrea Fracasso

    ()
    (Department of Economics, University of Trento)

Abstract

The global crisis has revived the growth-rebalancing debate, backing the position of those advocating a fast reduction of the imbalances between the US and China. By means of a two-country two-stage growth model reproducing the main qualitative features of the Sino-American co-dependency, we analyze alternative (medium- and long-term) scenarios for its evolution. We show that altering the Chinese exchange rate policy and down-sizing the US external deficits with a view to moving the production of tradables toward the US may imply relevant costs: the emergence of structural unemployment in the US and a slow-down in the process whereby the Chinese labor force is gradually absorbed in the modern sectors of the economy.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://riss.vitaepensiero.it/scheda-articolo_digital/luigi-bonatti-andrea-fracasso/the-costs-of-rebalancing-the-china-us-co-dependency-000518_2012_0001_0059-151017.html
Download Restriction: Yes

Bibliographic Info

Article provided by Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore in its journal Rivista Internazionale di Scienze Sociali.

Volume (Year): 120 (2012)
Issue (Month): 1 ()
Pages: 59-106

as in new window
Handle: RePEc:vep:journl:y:2012:v:120:i:1:p:59-106

Contact details of provider:

Related research

Keywords: growth-rebalancing; global imbalances; structural unemployment;

Find related papers by JEL classification:

References

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.:
as in new window
  1. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sector Level," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 820-835, October.
  2. Hume, Michael & Sentance, Andrew, 2009. "The global credit boom: challenges for macroeconomics and policy," Discussion Papers, Monetary Policy Committee Unit, Bank of England 27, Monetary Policy Committee Unit, Bank of England.
  3. Hua, Ping, 2007. "Real exchange rate and manufacturing employment in China," China Economic Review, Elsevier, Elsevier, vol. 18(3), pages 335-353.
  4. Jose Manuel Campa & Linda S. Goldberg, 2001. "Employment Versus Wage Adjustment And The U.S. Dollar," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 477-489, August.
  5. International Monetary Fund, 2009. "Employment Effects of Growth Rebalancing in China," IMF Working Papers, International Monetary Fund 09/169, International Monetary Fund.
  6. Eswar S. Prasad & Raghuram G. Rajan, 2006. "Modernizing China's Growth Paradigm," American Economic Review, American Economic Association, American Economic Association, vol. 96(2), pages 331-336, May.
  7. Robert Dekle & Guillaume Vandenbroucke, 2010. "Whither Chinese Growth? A Sectoral Growth Accounting Approach," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 14(s1), pages 487-498, 08.
  8. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 568, China Economics and Management Academy, Central University of Finance and Economics.
  9. Revenga, Ana L, 1992. "Exporting Jobs? The Impact of Import Competition on Employment and Wages in U.S. Manufacturing," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(1), pages 255-84, February.
  10. Loayza, Norman V. & Raddatz, Claudio, 2006. "The composition of growth matters for poverty alleviation," Policy Research Working Paper Series, The World Bank 4077, The World Bank.
  11. Marcos D. Chamon & Eswar S. Prasad, 2010. "Why Are Saving Rates of Urban Households in China Rising?," American Economic Journal: Macroeconomics, American Economic Association, American Economic Association, vol. 2(1), pages 93-130, January.
  12. Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006. "An Equilibrium Model of Global Imbalances and Low Interest Rates," 2006 Meeting Papers, Society for Economic Dynamics 894, Society for Economic Dynamics.
  13. Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Feb.
  14. Obstfeld, Maurice, 2011. "Financial Flows, Financial Crises, and Global Imbalances," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8611, C.E.P.R. Discussion Papers.
  15. Bonatti, Luigi & Fracasso, Andrea, 2013. "Hoarding of international reserves in China: Mercantilism, domestic consumption and US monetary policy," Journal of International Money and Finance, Elsevier, Elsevier, vol. 32(C), pages 1044-1078.
  16. Dani Rodrik, 2008. "The Real Exchange Rate and Economic Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 365-439.
  17. Rudolfs Bems, 2008. "Aggregate Investment Expenditures on Tradable and Nontradable Goods," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 852-883, October.
  18. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The revived Bretton Woods system," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 9(4), pages 307-313.
  19. Yin-Wong Cheung & Xingwang Qian, 2009. "Hoarding of International Reserves: Mrs Machlup's Wardrobe and the Joneses," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 17(4), pages 824-843, 09.
  20. Paulo Gala, 2008. "Real exchange rate levels and economic development: theoretical analysis and econometric evidence," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 32(2), pages 273-288, March.
  21. Michael W. Klein & Scott Schuh & Robert K. Triest, 1999. "Job creation, job destruction, and the real exchange rate," Working Papers, Federal Reserve Bank of Boston 99-11, Federal Reserve Bank of Boston.
  22. Prasad, Eswar, 2007. "Is the Chinese Growth Miracle Built to Last?," IZA Discussion Papers 2995, Institute for the Study of Labor (IZA).
  23. Ronald McKinnon, 2006. "China's Exchange Rate Trap: Japan Redux?," American Economic Review, American Economic Association, American Economic Association, vol. 96(2), pages 427-431, May.
  24. International Monetary Fund, 2005. "Net Foreign Asset Positions and Consumption Dynamics in the International Economy," IMF Working Papers, International Monetary Fund 05/82, International Monetary Fund.
  25. Dani Rodrik, 2010. "Making Room for China in the World Economy," American Economic Review, American Economic Association, American Economic Association, vol. 100(2), pages 89-93, May.
  26. Leslie Lipschitz & Geneviève Verdier & Céline Rochon, 2008. "A Real Model of Transitional Growth and Competitiveness in China," IMF Working Papers, International Monetary Fund 08/99, International Monetary Fund.
  27. Lipschitz, Leslie & Rochon, Céline & Verdier, Geneviève, 2011. "A real model of transitional growth and competitiveness in China," Journal of Asian Economics, Elsevier, Elsevier, vol. 22(4), pages 267-283, August.
  28. Burgess, Simon M & Knetter, Michael M, 1998. "An International Comparison of Employment Adjustment to Exchange Rate Fluctuations," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 6(1), pages 151-63, February.
  29. Jonathan Eaton & Robert Dekle & Samuel Kortum, 2007. "Unbalanced Trade," American Economic Review, American Economic Association, American Economic Association, vol. 97(2), pages 351-355, May.
  30. Willem Thorbecke & Hanjiang Zhang, 2009. "The Effect Of Exchange Rate Changes On China'S Labour-Intensive Manufacturing Exports," Pacific Economic Review, Wiley Blackwell, Wiley Blackwell, vol. 14(3), pages 398-409, 08.
  31. Fracasso, Andrea & Schiavo, Stefano, 2009. "Global imbalances, exchange rates adjustment and the crisis: Implications from network analysis," Journal of Policy Modeling, Elsevier, Elsevier, vol. 31(5), pages 601-619, September.
  32. Olivier Blanchard & Francesco Giavazzi, 2006. "Rebalancing Growth in China: A Three-Handed Approach," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(4), pages 1-20.
  33. Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262201119, December.
  34. Marquis, Milton & Trehan, Bharat, 2010. "Relative productivity growth and the secular "decline" of U.S. manufacturing," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 50(1), pages 67-74, February.
  35. Ding, Sai & Knight, John, 2009. "Can the augmented Solow model explain China's remarkable economic growth? A cross-country panel data analysis," Journal of Comparative Economics, Elsevier, vol. 37(3), pages 432-452, September.
  36. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries," NBER Working Papers 10332, National Bureau of Economic Research, Inc.
  37. Raghuram G. Rajan, 2006. "Global Imbalances and Financial Reform with Examples from China," Cato Journal, Cato Journal, Cato Institute, Cato Journal, Cato Institute, vol. 26(2), pages 267-273, Spring/Su.
  38. John Knight & Deng Quheng and Li Shi, 2010. "The Puzzle of Migrant Labour Shortage and Rural Labour Surplus in China," Economics Series Working Papers, University of Oxford, Department of Economics 494, University of Oxford, Department of Economics.
  39. Felipe Meza & Carlos Urrutia, 2010. "Financial Liberalization, Structural Change, and Real Exchange Rate Appreciations," IMF Working Papers, International Monetary Fund 10/63, International Monetary Fund.
  40. Luigi Bonatti & Andrea Fracasso, 2010. "Global Rebalancing and the Future of the Sino-US Codependency," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(s1), pages 70-87.
  41. Eden, Maya & Nguyen, Ha, 2012. "Correcting real exchange rate misalignment : conceptual and practical issues," Policy Research Working Paper Series, The World Bank 6045, The World Bank.
  42. Gourinchas, Pierre-Olivier, 1999. "Exchange rates do matter: French job reallocation and exchange rate turbulence, 1984-1992," European Economic Review, Elsevier, Elsevier, vol. 43(7), pages 1279-1316, June.
  43. Emanuele Baldacci & Ding Ding & David Coady & Giovanni Callegari & Pietro Tommasino & Jaejoon Woo & Manmohan S. Kumar, 2010. "Public Expenditureson Social Programs and Household Consumption in China," IMF Working Papers, International Monetary Fund 10/69, International Monetary Fund.
  44. Ronald McKinnon & Gunther Schnabl, 2009. "The Case for Stabilizing China's Exchange Rate: Setting the Stage for Fiscal Expansion," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(1), pages 1-32.
  45. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262150476, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bonatti, Luigi & Fracasso, Andrea, 2013. "Hoarding of international reserves in China: Mercantilism, domestic consumption and US monetary policy," Journal of International Money and Finance, Elsevier, Elsevier, vol. 32(C), pages 1044-1078.
  2. Bonatti, Luigi & Fracasso, Andrea, 2013. "Regime switches in the Sino-American co-dependency: Growth and structural change in China," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 25(C), pages 1-32.
  3. Luigi Pierfranco Campiglio, 2014. "Unbundling the Great European Recession (2009-2013): Unemployment, Consumption, Investment, Inflation and Current Account," DISCE - Quaderni dell'Istituto di Politica Economica, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) ispe0067, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  4. Bonatti, Luigi & Fracasso, Andrea, 2014. "Modeling the Transition Towards Renminbi's Full Convertibility: Implications for China’s Growth," MPRA Paper 54129, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:vep:journl:y:2012:v:120:i:1:p:59-106. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vep - Vita e Pensiero).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.