IDEAS home Printed from https://ideas.repec.org/a/wsi/ceprxx/v05y2016i01ns1793969016500023.html
   My bibliography  Save this article

The Euro and the Yuan: Some Political Economy Considerations

Author

Listed:
  • Nathalie Aminian

    (University of Rouen, 3, avenue Pasteur - 76186 Rouen Cedex, France)

  • K. C. Fung

    (Department of Economics, University of California, Santa Cruz, CA 95064, USA)

  • Maurice K. S. Tse

    (School of Economics and Finance, University of Hong Kong, KK Leung Building, Pokfulam Road, Hong Kong)

Abstract

This paper sets out a political economy model of exchange rates, focusing on the importance of lobbying. Applying it to the Euro and the Chinese Yuan, we show that pressure groups in China can influence the determination of exchange rate. Furthermore, international negotiations could theoretically lead to an appreciation of the Chinese Yuan. We further extend the political economy model to include some of the special characteristics of Chinese trade such as the prevalence of processing trade and foreign-invested enterprises. Our paper makes a theoretical contribution in linking the Yuan, the Euro, trade disputes and politics. High unemployment and sluggish growth in Europe have led many European voters to put pressure on their governments and Brussels to take a tougher stance in trade disputes with China, leading to a form of “China bashing”.

Suggested Citation

  • Nathalie Aminian & K. C. Fung & Maurice K. S. Tse, 2016. "The Euro and the Yuan: Some Political Economy Considerations," China Economic Policy Review (CEPR), World Scientific Publishing Co. Pte. Ltd., vol. 5(01), pages 1-13, June.
    • Handle: RePEc:wsi:ceprxx:v:05:y:2016:i:01:n:s1793969016500023
    DOI: 10.1142/S1793969016500023
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S1793969016500023
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S1793969016500023?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Nathalie Aminian & KC Fung & Alicia Garcia-Herrero & Chelsea C Lin, 2007. "The Political Economy of Exchange Rates: The Case of the Japanese Yen," Working Papers 0702, BBVA Bank, Economic Research Department.
    2. B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(1), pages 1-31.
    3. K. C. Fung & Alicia Garcia-Herrero & Alan Siu, 2010. "Developing countries and the World Trade Organization: A foreign influence approach," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 19(1), pages 187-201.
    4. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    5. K. C. Fung & Lawrence J. Lau & Yanyan Xiong, 2006. "Adjusted Estimates Of United States–China Bilateral Trade Balances: An Update," Pacific Economic Review, Wiley Blackwell, vol. 11(3), pages 299-314, October.
    6. Antràs, Pol & Padró i Miquel, Gerard, 2011. "Foreign influence and welfare," Journal of International Economics, Elsevier, vol. 84(2), pages 135-148, July.
    7. Ronald McKinnon & Kenichi Ohno, 2001. "The Foreign Exchange Origins of Japan's Economic Slump and Low Interest Liquidity Trap," The World Economy, Wiley Blackwell, vol. 24(3), pages 279-315, March.
    8. Morris Goldstein & Nicholas R. Lardy (ed.), 2008. "Debating China's Exchange Rate Policy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 4150, October.
    9. Salvatore,Dominick (ed.), 1993. "Protectionism and World Welfare," Cambridge Books, Cambridge University Press, number 9780521414555.
    10. Ronald I. McKinnon & Kenichi Ohno, 1997. "Dollar and Yen: Resolving Economic Conflict between the United States and Japan," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262133350, December.
    11. Fung, K. C., 2002. "International Trade and Bank Groups: Welfare Enhancing or Welfare Reducing?," Journal of the Japanese and International Economies, Elsevier, vol. 16(2), pages 212-226, June.
    12. Salvatore,Dominick (ed.), 1993. "Protectionism and World Welfare," Cambridge Books, Cambridge University Press, number 9780521424899.
    13. Wing Thye Woo, 2008. "Understanding the Sources of Friction in U.S.-China Trade Relations: The Exchange Rate Debate Diverts Attention from Optimum Adjustment," Asian Economic Papers, MIT Press, vol. 7(3), pages 61-95, Fall.
    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


    Cited by:

    1. Fung, Kwok-chiu & Aminian, Nathalie & Korhonen, Iikka & Wong, Keith K. P., 2017. "The Chinese Yuan: Influence of interest groups examined," BOFIT Policy Briefs 6/2017, Bank of Finland Institute for Emerging Economies (BOFIT).
    2. Xiangjun Ma & John McLaren, 2018. "A Swing-State Theorem, with Evidence," NBER Working Papers 24425, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. K. C. Fung & Nathalie Aminian & Alicia Garcia-Herrero, 2015. "Some International Policy Issues for China," China Economic Policy Review (CEPR), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-10, June.
    2. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    3. Pravin Krishna & Devashish Mitra, 2016. "Reciprocated unilateralism in trade policy," World Scientific Book Chapters, in: The Political Economy of Trade Policy Theory, Evidence and Applications, chapter 3, pages 37-63, World Scientific Publishing Co. Pte. Ltd..
    4. Grossman, Gene M & Helpman, Elhanan, 1995. "The Politics of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 85(4), pages 667-690, September.
    5. Scott Gehlbach & Konstantin Sonin & Ekaterina Zhuravskaya, 2010. "Businessman Candidates," American Journal of Political Science, John Wiley & Sons, vol. 54(3), pages 718-736, July.
    6. John Morgan & Felix Várdy, 2011. "On the buyability of voting bodies," Journal of Theoretical Politics, , vol. 23(2), pages 260-287, April.
    7. Eddie Dekel & Matthew O. Jackson & Asher Wolinsky, 2004. "Vote Buying," Discussion Papers 1386, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
      • Jackson, Matthew O. & Dekel, Eddie & Wolinsky, Asher, 2005. "Vote buying," Working Papers 1215, California Institute of Technology, Division of the Humanities and Social Sciences.
      • Eddie Dekel & Matthew O. Jackson & Asher Wolinsky, 2005. "Vote Buying," Others 0503006, University Library of Munich, Germany.
    8. Deniz Igan & Prachi Mishra & Thierry Tressel, 2012. "A Fistful of Dollars: Lobbying and the Financial Crisis," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 195-230.
    9. Tonis Alexander, 2002. "Privileges for Enterprises: Efficient Discrimination or Room for Abuse?," EERC Working Paper Series 02-01e, EERC Research Network, Russia and CIS.
    10. Bennedsen, Morten & Feldmann, Sven E., 2006. "Informational lobbying and political contributions," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 631-656, May.
    11. Gaoussou Diarra & Sébastien Marchand, 2011. "Environmental Compliance, Corruption and Governance: Theory and Evidence on Forest Stock in Developing Countries," Working Papers halshs-00557677, HAL.
    12. Rupa Duttagupta & Arvind Panagariya, 2007. "Free Trade Areas And Rules Of Origin: Economics And Politics," Economics and Politics, Wiley Blackwell, vol. 19(2), pages 169-190, July.
    13. Cotton, Christopher, 2012. "Pay-to-play politics: Informational lobbying and contribution limits when money buys access," Journal of Public Economics, Elsevier, vol. 96(3), pages 369-386.
    14. Matthias Dahm & Robert Dur & Amihai Glazer, 2009. "Lobbying of Firms by Voters," Working Papers 080926, University of California-Irvine, Department of Economics.
    15. Fredriksson, Per G. & List, John A. & Millimet, Daniel L., 2003. "Bureaucratic corruption, environmental policy and inbound US FDI: theory and evidence," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1407-1430, August.
    16. Leonardo Felli & Antonio Merlo, 2006. "Endogenous Lobbying," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 180-215, March.
    17. Kuang-Feng Cheng & Chien-Shu Tsai & Chu-Chuan Hsu & Szu-Chung Lin & Ting-Chung Tsai & Jen-Yao Lee, 2019. "Emission Tax and Compensation Subsidy with Cross-Industry Pollution," Sustainability, MDPI, vol. 11(4), pages 1-23, February.
    18. Dekel, Eddie & Jackson, Matthew O. & Wolinsky, Asher, 2009. "Vote Buying: Legislatures and Lobbying," Quarterly Journal of Political Science, now publishers, vol. 4(2), pages 103-128, July.
    19. Liu, Ting & Sun, Jiayin, 2007. "Informal payments in developing countries' public health sector," MPRA Paper 5279, University Library of Munich, Germany.
    20. Giovanni Facchini & Johannes Van Biesebroeck & Gerald Willmann, 2006. "Protection for sale with imperfect rent capturing," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 845-873, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ceprxx:v:05:y:2016:i:01:n:s1793969016500023. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/cepr/cepr.shtml .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.