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China's Rapid Growth, Yuan Misalignment and Global Imbalances

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  • Tony Makin

Abstract

This paper develops a new international monetary framework for analysing the domestic and international repercussions of China’s exchange rate policy in the context of its rapid development. This straightforward framework reveals that misalignment of the yuan against major currencies artificially assists China’s output growth, contributes to global imbalances and limits household consumption, slowing the rise in living standards. Meanwhile, China’s Western trading partners, most notably the United States and the European Union, simultaneously experience external deficits, lower output and saving due to exchange rate misalignment.

Suggested Citation

  • Tony Makin, 2007. "China's Rapid Growth, Yuan Misalignment and Global Imbalances," DEGIT Conference Papers c012_012, DEGIT, Dynamics, Economic Growth, and International Trade.
    • Handle: RePEc:deg:conpap:c012_012
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    File URL: http://degit.sam.sdu.dk/papers/degit_12/C012_012.pdf
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    References listed on IDEAS

    as
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    Keywords

    output; expenditure; economic development; exchange rate misalignment; trading partners; global imbalances;
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