China and its Dollar Exchange Rate: A Worldwide Stabilizing Influence?
AbstractWe argue that criticism concerning the Chinese dollar peg is misplaced as no predictable link exists between the exchange rate and the trade balance of an international creditor economy. The stable nominal yuan/dollar rate is argued to have stabilized Chinese, East Asian and global growth. However, linked to US low interest rates, Chinese sterilization policies and potentially subsidized capital allocation in China the real yuan/dollar rate is undervalued. This has caused—both in China and the United States— structural distortions and threatens to undermine global growth and stability. We propose Sino-American policy coordination to escape from the policy dilemma, which continues to drive global imbalances.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3449.
Date of creation: 2011
Date of revision:
China; exchange rate; financial stability; economic stability; international policy coordination; currency war;
Other versions of this item:
- Ronald McKinnon & Gunther Schnabl, 2012. "China and Its Dollar Exchange Rate: A Worldwide Stabilising Influence?," The World Economy, Wiley Blackwell, vol. 35(6), pages 667-693, 06.
- F15 - International Economics - - Trade - - - Economic Integration
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
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.:
- Ronald Ian McKinnon & Gunther Schnabl, 2006.
"China’s Exchange Rate and International Adjustment in Wages, Prices, and Interest Rates: Japan Déjà Vu?,"
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1720, CESifo Group Munich.
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"Limits of Monetary Policy Autonomy and Exchange Rate Flexibility by East Asian Central Banks,"
Global Financial Markets Working Paper Series
48-2013, Friedrich-Schiller-University Jena.
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- Menkhoff, Lukas, 2012.
"Foreign Exchange Intervention in Emerging Markets: A Survey of Empirical Studies,"
Hannover Economic Papers (HEP)
dp-498, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
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- Gábor, Tamás, 2012. "China's monetary sterilization and it's economical relationship with the European Union," MPRA Paper 40362, University Library of Munich, Germany.
- Kristina Spantig, 2012. "International monetary policy spillovers in an asymmetric world monetary system - The United States and China," Global Financial Markets Working Paper Series 2012-33, Friedrich-Schiller-University Jena.
- Axel Löffler & Gunther Schnabl & Franziska Schobert, 2012. "Limits of Monetary Policy Autonomy by East Asian Debtor Central Banks," CESifo Working Paper Series 3742, CESifo Group Munich.
- Gunther Schnabl, 2012. "Monetary Policy Reform in a World of Central Banks," Global Financial Markets Working Paper Series 26-2012, Friedrich-Schiller-University Jena.
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