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The RMB Debate: Empirical Analysis on the Effects of Exchange Rate Shocks in China and Japan

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  • Soyoung Kim
  • Yoonbai Kim

Abstract

For a better understanding of the ongoing debates on the RMB, this paper investigates the effects of exchange rate shocks on output and the current account for China and Japan. We use structural vector auto-regression models and find that yen appreciation reduces current account surpluses while having no strong effect on output in Japan. RMB appreciation, on the other hand, has insignificant effect on the current account, although it tends to reduce output in China. For China, dollar pricing with vertical trade integration seems responsible for the insignificant effect on the current account.

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File URL: https://dspace.aus.edu:8443/xmlui/bitstream/handle/11073/6054/WPS_Kim-Kim.pdf?sequence=1
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Bibliographic Info

Paper provided by School of Business Administration, American University of Sharjah in its series Economics Working Papers with number 16-01/2014.

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Length: 36 pages
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Handle: RePEc:sha:ecowps:16-01/2014

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Keywords: renminbi appreciation; current account imbalance; VAR; exchange rate shocks; recession;

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  2. Soyoung Kim & Jong‐Wha Lee & Cyn‐Young Park, 2011. "Ties Binding Asia, Europe and the USA," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 19(1), pages 24-46, 01.
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