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Exchange rate movements and aggregate output: the case of China

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  • Yu Hsing

Abstract

Applying an extended IS-MP-AS model (Romer, 2000), this paper finds that real GDP in China has a positive relationship with real depreciation during 1990-2005 and the real stock price and a negative relationship with real depreciation during 2006-2016, the lagged US real interest rate, the real oil price and the expected inflation rate. Therefore, during 1990-2005, the benefits of real depreciation such as more exports overwhelmed the costs of real depreciation such as higher import costs, higher inflation and less capital inflows whereas during 2006-2016, the benefits of real appreciation such as lower import costs, lower inflation, and more capital inflows dominated its negative effects such as less exports.

Suggested Citation

  • Yu Hsing, 2020. "Exchange rate movements and aggregate output: the case of China," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 13(2), pages 135-143.
    • Handle: RePEc:ids:ijtrgm:v:13:y:2020:i:2:p:135-143
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    Cited by:

    1. Deepika Krishnan & Vishal Dagar, 2022. "Exchange Rate and Stock Markets During Trade Conflicts in the USA, China, and India," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 14(2), pages 185-203, May.

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