China: Sources of Real Exchange Rate Fluctuations

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China: Sources of Real Exchange Rate Fluctuations

Author Info

Tao Wang

Abstract

This paper reviews the evolution of China's real effective exchange rate between 1980 and 2002, and uses a structural vector autoregression model to study the relative importance of different types of macroeconomic shocks for fluctuations in the real exchange rate. The structural decomposition shows that relative real demand and supply shocks account for most of the variations in real exchange rate changes during the estimation period. The paper also finds that supply shocks are as important as nominal shocks in accounting for real exchange rate fluctuations, in contrast with other studies that show that, in industrial countries, nominal shocks are more important in explaining real exchange rate fluctuations.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/18.

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Length: 22 pages
Date of creation: 17 Feb 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/18

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This paper has been announced in the following NEP Reports:

NEP-ALL-2005-10-22 (All new papers)
NEP-FMK-2005-10-22 (Financial Markets)
NEP-IFN-2005-10-22 (International Finance)
NEP-MAC-2005-10-22 (Macroeconomics)
NEP-SEA-2005-10-22 (South East Asia)
NEP-TRA-2005-10-22 (Transition Economics)

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.:

Martin Eichenbaum & Charles L. Evans, 1993. "Some Empirical Evidence on the Effects of Monetary Policy Shocks on Exchange Rates," NBER Working Papers 4271, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Martin Eichenbaum & Charles Evans, 1992. "Some empirical evidence on the effects of monetary policy shocks on exchange rates," Working Paper Series, Macroeconomic Issues 92-32, Federal Reserve Bank of Chicago.
Clarida, Richard & Galí, Jordi, 1994. "Sources of Real Exchange Rate Fluctuations: How Important are Nominal Shocks?," CEPR Discussion Papers 951, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- Clarida, R. & Gali, J., 1993. "Sources of Real Exchange Rate Fluctuations: How Important are Nominal Shocks?," Discussion Papers 1993_25, Columbia University, Department of Economics.
- Jordi Galí & Richard Clarida, 1993. "Sources of Real Exchage Rate Fluctuations: How Important are Nominal Shocks?," Economics Working Papers 66, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 1994. [Downloadable!]
- Richard Clarida & Jordi Gali, 1994. "Sources of Real Exchange Rate Fluctuations: How Important are Nominal Shocks?," NBER Working Papers 4658, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Clarida, Richard & Gali, Jordi, 1994. "Sources of real exchange-rate fluctuations: How important are nominal shocks?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 41(1), pages 1-56, December. [Downloadable!] (restricted)
- Richard Clarida & Jordi Gali, 1994. "Sources of real exchange rate fluctuations: how important are nominal shocks?," Proceedings, Federal Reserve Bank of Dallas, issue Apr.
Chou, W. L. & Shih, Y. C., 1998. "The Equilibrium Exchange Rate of the Chinese Renminbi," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 165-174, March. [Downloadable!] (restricted)
Zhang, Zhichao, 2001. "Real Exchange Rate Misalignment in China: An Empirical Investigation," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 80-94, March. [Downloadable!] (restricted)
Chris Faulkner-MacDonagh & Taimur Baig & JÃ¶rg Decressin & Tarhan Feyzioglu & Manmohan S. Kumar, 2003. "Deflation: Determinants, Risks, and Policy Options," IMF Occasional Papers 221, International Monetary Fund.
Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September. [Downloadable!] (restricted)
Other versions:
- Olivier Jean Blanchard & Danny Quah, 1990. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
Hoffmaister, Alexander W. & Roldos, Jorge E., 2001. "The Sources of Macroeconomic Fluctuations in Developing Countries: Brazil and Korea," Journal of Macroeconomics, Elsevier, vol. 23(2), pages 213-239, April. [Downloadable!] (restricted)
Other versions:
- Alexander W. Hoffmaister & Jorge Roldos, 1996. "The Sources of Macroeconomic Fluctuations in Developing Countries: Brazil and Korea," IMF Working Papers 96/20, International Monetary Fund.
Dibooglu, Selahattin & Kutan, Ali M., 2001. "Sources of Real Exchange Rate Fluctuations in Transition Economies: The Case of Poland and Hungary," Journal of Comparative Economics, Elsevier, vol. 29(2), pages 257-275, June. [Downloadable!] (restricted)
Agenor, Pierre-Richard & McDermott, C John & Prasad, Eswar S, 2000. "Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts," World Bank Economic Review, Oxford University Press, vol. 14(2), pages 251-85, May. [Downloadable!]
Other versions:
- Eswar Prasad & Pierre-Richard AgÃ©nor & C. John McDermott, 1999. "Macroeconomic Fluctuations in Developing Countries - Some Stylized Facts," IMF Working Papers 99/35, International Monetary Fund.
Ahmed, Shaghil, 2003. "Sources of economic fluctuations in Latin America and implications for choice of exchange rate regimes," Journal of Development Economics, Elsevier, vol. 72(1), pages 181-202, October. [Downloadable!] (restricted)
Matthew B. Canzoneri & Javier Vallés & José Viñals, 1996. "Do Exchange Rate Move to Address International Macroeconomic Imbalances?," Banco de EspaÃ±a Working Papers 9626, Banco de España.
Other versions:
- Canzoneri, Matthew B & Vallés Liberal, Javier & Viñals, José, 1996. "Do Exchange Rates Move to Address International Macroeconomic Imbalances?," CEPR Discussion Papers 1498, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, 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.)

Katie Farrant & Gert Peersman, . "Accounting for the source of exchange rate movements: new evidence," Bank of England working papers 269, Bank of England. [Downloadable!]
Sfia, Mohamed Daly, 2006. "Tunisia: Sources Of Real Exchange Rate Fluctuations," MPRA Paper 3129, University Library of Munich, Germany. [Downloadable!]

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