Structural Effects of a Real Exchange Rate Revaluation in China: A CGE Assessment
AbstractThe misalignment of the Chinese currency exposed by the rapid build-up of China’s foreign exchange reserves over the past few years has been the subject of considerable recent debate. Recent econometric studies suggest a Renminbi undervaluation on the order of 10 to 30%. The modest revaluation of July 2005 is widely perceived as insufficient to correct China’s balance-of-payments disequilibrium and has not silenced charges that China is engaging in persistent one-sided currency manipulation. Within China there are widespread concerns regarding the adverse employment effects of a major revaluation on labour-intensive export sectors, yet the likely magnitude of these effects remains a controversial issue. The paper aims to shed light on this question by simulating the structural effects of a real exchange rate revaluation that lowers the current account surplus-GDP by 4 percentage-points using a 17-sector computable general equilibrium model of the Chinese economy.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 920.
Date of creation: Apr 2006
Date of revision:
Renminbi undervaluation; real exchange rate misalignment; applied general equilibrium analysis;
Find related papers by JEL classification:
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
- F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-12-04 (All new papers)
- NEP-CBA-2006-12-04 (Central Banking)
- NEP-CMP-2006-12-04 (Computational Economics)
- NEP-CNA-2006-12-04 (China)
- NEP-IFN-2006-12-04 (International Finance)
- NEP-SEA-2006-12-04 (South East Asia)
- NEP-TRA-2006-12-04 (Transition Economics)
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