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Lessons from Taiwan's experience of currency appreciation

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  • Xu, Yingfeng

Abstract

In the late 1980s, Taiwan confronted a situation very similar to what China is facing today: heavy pressures for the domestic currency to appreciate. In 1986-1992, the new Taiwan dollar appreciated 58% against the US dollar after the authorities gave up foreign exchange market interventions in order to improve monetary control. We found that driven strongly by speculative flows, the appreciation caused painful short-run consequences of declining export production and employment. However, the appreciation of the new Taiwan dollar had positive long-term effects in accelerating the upgrading Taiwan's manufacturing to more skill-intensive and capital-intensive activities and boosting the expansion of the service sector.

Suggested Citation

  • Xu, Yingfeng, 2008. "Lessons from Taiwan's experience of currency appreciation," China Economic Review, Elsevier, vol. 19(1), pages 53-65, March.
    • Handle: RePEc:eee:chieco:v:19:y:2008:i:1:p:53-65
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    References listed on IDEAS

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    Cited by:

    1. Zhibai Zhang & Langnan Chen & Xinyue Zou, 2015. "RMB Undervaluation and Appreciation," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(12), pages 1267-1281, December.

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