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The Real Exchange Rate, Sectoral Allocation and Development in China and East Asia: A Simple Exposition

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  • Ramkishen S. Rajan

    ()
    (Associate Professor, School of Public Policy, George Mason University, VA and Senior Visiting Research Fellow, Institute of Southeast Asian Studies (ISEAS), Singapore)

  • Javier Beverinotti

    ()
    (Research Scholar, School of Public Policy, George Mason University, VA)

Abstract

Global macroeconomic imbalances are among the key issues facing policymakers, especially in the US and China which are the two major affected / contributing parties. While there has been a great deal of discussion and disagreement on this important issue, what all sides have in common is the general failure to adequately pay attention to the role of the exchange rate in allocating resources internally between tradables and nontradables. These sectoral changes can have both real and macroeconomic consequences. This paper offers a simple analytical exposition of some of the issues relating to China’s and East Asian development and their impact on global imbalances using a two-sector tradable and nontradables model.

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Paper provided by United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in its series MPDD Working Paper Series with number WP/10/09.

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Handle: RePEc:unt:wpmpdd:wp/10/09

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  1. Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
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  9. Corden, W. Max, 1986. "Inflation, Exchange Rates, and the World Economy," University of Chicago Press Economics Books, University of Chicago Press, edition 3, number 9780226115825, October.
  10. Ouyang, Alice Y. & Rajan, Ramkishen S. & Willett, Thomas D., 2010. "China as a reserve sink: The evidence from offset and sterilization coefficients," Journal of International Money and Finance, Elsevier, vol. 29(5), pages 951-972, September.
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  12. Alvaro Aguirre & César Calderón, 2005. "Real Exchange Rate Misalignments and Economic Performance," Working Papers Central Bank of Chile 316, Central Bank of Chile.
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