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A Darwinian Perspective on “Exchange Rate Undervaluation”

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  • Du , Qingyuan

    (Monash University)

  • Wei , Shang-Jin

    (Asian Development Bank)

Abstract

This paper studies how status competition for marriage partners can generate surprising effects on the real exchange rate (RER). In theory, a rise in the sex ratio(increasing relative surplus of men) can generate a decline in the RER. The effect can be quantitatively large if the biological desire for a marriage partner is strong. We also provide within-the People’s Republic of China and cross country empirical evidence to support the theory. As an application, our cross-country estimation suggests that sex ratio as well as other factors in the existing literature can account for the recent evolution in Chinese RER almost completely.

Suggested Citation

  • Du , Qingyuan & Wei , Shang-Jin, 2015. "A Darwinian Perspective on “Exchange Rate Undervaluation”," ADB Economics Working Paper Series 456, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0456
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    Cited by:

    1. Dennis Tao Yang, 2012. "Aggregate Savings and External Imbalances in China," Journal of Economic Perspectives, American Economic Association, vol. 26(4), pages 125-146, Fall.
    2. Shang-Jin Wei & Xiaobo Zhang, 2011. "Sex Ratios, Entrepreneurship, and Economic Growth in the People's Republic of China," NBER Working Papers 16800, National Bureau of Economic Research, Inc.
    3. Shang-Jin Wei & Xiaobo Zhang & Yin Liu, 2012. "Status Competition and Housing Prices," NBER Working Papers 18000, National Bureau of Economic Research, Inc.
    4. Jane Golley & Rod Tyers, 2012. "China's Gender Imbalance and its Economic Performance," Economics Discussion / Working Papers 12-10, The University of Western Australia, Department of Economics.
    5. Virginia Di Nino & Barry Eichengreen & Massimo Sbracia, 2011. "Real exchange rates, trade, and growth: Italy 1861-2011," Quaderni di storia economica (Economic History Working Papers) 10, Bank of Italy, Economic Research and International Relations Area.
    6. Jane Golley & Rod Tyers & Yixiao Zhou, 2016. "Contractions in Chinese Fertility and Savings: Long-run Domestic and Global Implications," RBA Annual Conference Volume (Discontinued), in: Iris Day & John Simon (ed.),Structural Change in China: Implications for Australia and the World, Reserve Bank of Australia.
    7. Jane Golley & Rod Tyers, 2012. "Gender 'Rebalancing' in China: A Global-Level Analysis," CAMA Working Papers 2012-46, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    8. Wei, Shang-Jin & Zhang, Xiaobo & Liu, Yin, 2017. "Home ownership as status competition: Some theory and evidence," Journal of Development Economics, Elsevier, vol. 127(C), pages 169-186.

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    More about this item

    Keywords

    currency manipulation; equilibrium real exchange rate; surplus men;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • J70 - Labor and Demographic Economics - - Labor Discrimination - - - General

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