The role of the chinese dollar peg for macroeconomic stability in China and the world economy
AbstractDuring the 1997/98 Asian crisis and the 2007-2010 world financial and economic crisis, China has proved to be a stabilizer for East Asia and the world. The paper stresses the crucial role of the dollar peg for macroeconomic stability in China. The paper explores the current role of China's nominal exchange rate stabilization as stabilizing factor for China, East Asia and the world economy. Distortions originating in real exchange rate stabilization are identified and are argued to be a risk for global growth perspectives. To prevent further economic and financial turmoil the paper recommends policy coordination between China and the US. The exit from unconventional low interest rate policies in the US combined with the end of real (but not nominal) exchange rate stabilization in China is seen as necessary to stabilize longterm growth in China, East Asia and the US.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena in its series Global Financial Markets Working Paper Series with number 13-2010.
Date of creation: 10 Jan 2011
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China; dollar peg; structural distortions; international policy coordination; global imbalances;
Find related papers by JEL classification:
- F15 - International Economics - - Trade - - - Economic Integration
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-16 (All new papers)
- NEP-IFN-2011-01-16 (International Finance)
- NEP-MON-2011-01-16 (Monetary Economics)
- NEP-SEA-2011-01-16 (South East Asia)
- NEP-TRA-2011-01-16 (Transition Economics)
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