China and Its Dollar Exchange Rate: A Worldwide Stabilising Influence?
We argue that criticism concerning the Chinese dollar peg is misplaced as no predictable link exists between the exchange rate and the trade balance of an international creditor economy. The stable nominal yuan/dollar rate is argued to have stabilized Chinese, East Asian and global growth. However, linked to US low interest rates, Chinese sterilization policies and potentially subsidized capital allocation in China the real yuan/dollar rate is undervalued. This has caused—both in China and the United States— structural distortions and threatens to undermine global growth and stability. We propose Sino-American policy coordination to escape from the policy dilemma, which continues to drive global imbalances.
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Volume (Year): 35 (2012)
Issue (Month): 6 (06)
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References listed on IDEAS
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- Ronald McKinnon & Gunther Schnabl, 2009. "The Case for Stabilizing China's Exchange Rate: Setting the Stage for Fiscal Expansion," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(1), pages 1-32.
- Schnabl, Gunther & Freitag, Stephan, 2010. "Reverse causality in global current accounts," Working Paper Series 1208, European Central Bank.
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"China’s Exchange Rate and International Adjustment in Wages, Prices, and Interest Rates: Japan Déjà Vu?,"
CESifo Working Paper Series
1720, CESifo Group Munich.
- Ronald McKinnon & Gunther Schnabl, 2006. "China's Exchange Rate and International Adjustment in Wages, Prices and Interest Rates: Japan Déjà Vu?," CESifo Economic Studies, CESifo, vol. 52(2), pages 276-303, June.
- Galina Hale & Cheryl Long, 2010. "If you try, you’ll get by: Chinese private firms’ efficiency gains from overcoming financial constraints," Working Paper Series 2010-21, Federal Reserve Bank of San Francisco.
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"Synchronized Business Cycles in East Asia and Fluctuations in the Yen/Dollar Exchange Rate,"
022003, Hong Kong Institute for Monetary Research.
- Ronald McKinnon & Gunther Schnabl, 2003. "Synchronised Business Cycles in East Asia and Fluctuations in the Yen/Dollar Exchange Rate," The World Economy, Wiley Blackwell, vol. 26(8), pages 1067-1088, 08.
- Gunther Schnabl & Paul De Grauwe, 2004. "Nominal versus Real Convergence with Respect to EMU Accession - EMU Entry Scenarios for the New Member States," International Finance 0403008, EconWPA, revised 05 Jul 2004.
- Gunther Schnabl, 2011. "The role of the chinese dollar peg for macroeconomic stability in China and the world economy," Global Financial Markets Working Paper Series 13-2010, Friedrich-Schiller-University Jena.
- Ronald McKinnon & Gunther Schnabl, 2004.
"The Return to Soft Dollar Pegging in East Asia: Mitigating Conflicted Virtue,"
Wiley Blackwell, vol. 7(2), pages 169-201, 07.
- Ronald McKinnon & Gunther Schnabl, 2004. "The Return to Soft Dollar Pegging in East Asia. Mitigating Conflicted Virtue," International Finance 0406007, EconWPA, revised 07 Jul 2004.
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