IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

China's Economic Growth and its Real Exchange Rate

  • Rod Tyers

    ()

  • Jane Golley

    ()

  • Bu Yongxiang
  • Ian Bain

    ()

The recent influx of financial capital to China implies expectations of continued real appreciation and, indeed, rapid expansion had previously led to real appreciations elsewhere in East Asia. In a world of open economies and differentiated traded goods, however, development-related productivity and endowment growth shocks tend to cause real depreciations, the principal exception being the Balassa case where non-traded service sectors are large and productivity shocks are restricted to traded sectors. China is a special case amongst developing countries in that its labour force is likely to decline in future and this will place upward pressure on real wages and its real exchange rate. This paper assesses the magnitudes of the various links between China’s growth performance and its real exchange rate using an adaptation of the GTAP-Dynamic global economic model in which a full demographic sub-model is incorporated. A baseline “business as usual” simulation is constructed to 2030, wherein China’s growth rate slows considerably due to ageing and slower labour force growth. Comparator simulations are then constructed for cases in which fertility policy is changed, sectoral factor productivity is higher and financial reform reduces the investment interest premium. China’s real exchange rate realignments are examined in each case, the results suggesting the current appreciating trend may be temporary, with depreciating forces appearing to dominate in the long term.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://www.cbe.anu.edu.au/researchpapers/econ/wp476.pdf
Download Restriction: no

Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANU Working Papers in Economics and Econometrics with number 2006-476.

as
in new window

Length: 32 pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:acb:cbeeco:2006-476
Contact details of provider: Postal: Canberra, ACT 2601
Phone: +61 2 6125 3807
Fax: +61 2 6125 0744
Web page: http://rse.anu.edu.au/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Jaewoo Lee & Joshua Aizenman, 2006. "Financial Versus Monetary Mercantilism; Long-Run View of the Large International Reserves Hoarding," IMF Working Papers 06/280, International Monetary Fund.
  2. Virginie Coudert & Cécile Couharde, 2005. "Real Equilibrium Exchange Rate in China," Working Papers 2005-01, CEPII research center.
  3. Joshua Aizenman & Jaewoo Lee, 2008. "Financial versus Monetary Mercantilism: Long-run View of Large International Reserves Hoarding," The World Economy, Wiley Blackwell, vol. 31(5), pages 593-611, 05.
  4. Prasad, Eswar & Rajan, Raghuram G., 2006. "Modernizing China's Growth Paradigm," IZA Discussion Papers 2248, Institute for the Study of Labor (IZA).
  5. Mohsin S. Khan & Ehsan U. Choudhri, 2004. "Real Exchange Rates in Developing Countries; Are Balassa-Samuelson Effects Present?," IMF Working Papers 04/188, International Monetary Fund.
  6. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "Direct Investment, Rising Real Wages and the Absorption of Excess Labor in the Periphery," NBER Working Papers 10626, National Bureau of Economic Research, Inc.
  7. Frankel, Jeffrey, 2004. "On the Renminbi: The Choice between Adjustment under a Fixed Exchange Rate and Adustment under a Flexible Rate," Working Paper Series rwp04-037, Harvard University, John F. Kennedy School of Government.
  8. Rod Tyers & Ian Bain & Jahnvi Vedi, 2006. "The global implications of freer skilled migration," ANU Working Papers in Economics and Econometrics 2006-468, Australian National University, College of Business and Economics, School of Economics.
  9. Carsten A Holz, 2005. "New Capital Estimates for China," Macroeconomics 0512001, EconWPA.
  10. Alwyn Young, 2003. "Gold into Base Metals: Productivity Growth in the People's Republic of China during the Reform Period," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1220-1261, December.
  11. David E. Bloom & Jeffrey G. Williamson, 1997. "Demographic Transitions and Economic Miracles in Emerging Asia," NBER Working Papers 6268, National Bureau of Economic Research, Inc.
  12. Cai Fang & Wang Dewen, 2005. "Demographic transition: implications for growth," Labor and Demography 0512001, EconWPA.
  13. Ken Miyajima, 2005. "Real Exchange Rates in Growing Economies; How Strong is the Role of the Nontradables Sector?," IMF Working Papers 05/233, International Monetary Fund.
  14. Chow, Gregory & Lin, An-loh, 2002. "Accounting for Economic Growth in Taiwan and Mainland China: A Comparative Analysis," Journal of Comparative Economics, Elsevier, vol. 30(3), pages 507-530, September.
  15. Shang-Jin Wei & Eswar Prasad, 2005. "The Chinese Approach to Capital Inflows; Patterns and Possible Explanations," IMF Working Papers 05/79, International Monetary Fund.
  16. Liu, Jing & Nico van Leeuwen & Tri Thanh Vo & Rod Tyers & Thomas W. Hertel, 1998. "Disaggregating Labor Payments by Skill Level in GTAP," GTAP Technical Papers 314, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  17. Steven A. Symansky & Peter S. Heller, 1997. "Implications for Savings of Aging in the Asian "Tigers"," IMF Working Papers 97/136, International Monetary Fund.
  18. Eswar Prasad & Qing Wang & Thomas Rumbaugh, 2005. "Putting the Cart Before the Horse? Capital Account Liberalization and Exchange Rate Flexibility in China," IMF Policy Discussion Papers 05/1, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:acb:cbeeco:2006-476. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.