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The political economy of “currency manipulation” bashing

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  • Ramirez, Carlos D.

Abstract

In recent years, one of the most frequently debated issues in Congress has been the value of the Chinese renminbi (RMB) relative to the U.S. dollar. Many members of Congress often accuse China of being a “currency manipulator.” This paper has two objectives. First, it investigates the extent to which PAC contributions from key interest groups as well as constituent interests influence the frequency with which members of Congress criticize China's exchange rate policy, controlling for other factors. The results indicate that the odds that a congressman will call China a “currency manipulator” are 1.35 times higher for every $5000 in PAC contributions from groups that favor legislation against China. In addition, the results show that a one percentage point increase in the share of the congressional district labor force in manufacturing is associated with a 19.6% increase in the likelihood that the district's legislator will label China a “currency manipulator.” Second, this paper investigates the consequences that “currency manipulation” bashing may have on the rate at which the RMB appreciates against the U.S. dollar. The results for a VAR model indicate that an increase in the incidence of “currency manipulation” bashing appears to temporarily slow down, rather than accelerate, the rate at which the renminbi appreciates against the dollar. This result suggests that bashing China may actually be counterproductive.

Suggested Citation

  • Ramirez, Carlos D., 2013. "The political economy of “currency manipulation” bashing," China Economic Review, Elsevier, vol. 27(C), pages 227-237.
    • Handle: RePEc:eee:chieco:v:27:y:2013:i:c:p:227-237
    DOI: 10.1016/j.chieco.2012.10.005
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    References listed on IDEAS

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    Cited by:

    1. Luigi Bonatti & Andrea Fracasso, 2016. "Modelling The Transition Towards The Renminbi'S Full Convertibility: Implications For China'S Growth," Bulletin of Economic Research, Wiley Blackwell, vol. 68(S1), pages 146-170, December.

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    More about this item

    Keywords

    Currency manipulation; China bashing; PAC contributions; Renminbi;
    All these keywords.

    JEL classification:

    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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