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China’s Exchange Rate Impasse and the Weak U.S. Dollar

  • Ronald Ian McKinnon
  • Gunther Schnabl

Since 2004, China has been backed into a situation where the renminbi is expected to go ever higher against the dollar, and this one-way bet has led to a loss of domestic monetary control. Combined with a more general flight from the U.S. dollar, the resulting monetary explosion in China contributes to the worldwide increase in primary commodity prices—with excess liquidity reminiscent of the global inflation generated by the weak dollar in the 1970s.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2386.

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Date of creation: 2008
Date of revision:
Handle: RePEc:ces:ceswps:_2386
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  1. Ronald Ian McKinnon, 2007. "The US current account deficits and the dollar standard’s sustainability: A monetary approach," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 8(4), pages 12-23, 01.
  2. 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.
  3. repec:oup:qjecon:v:117:y:2002:i:2:p:379-408 is not listed on IDEAS
  4. Gunther Schnabl & Andreas Hoffmann, 2008. "Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets: An Overinvestment View," The World Economy, Wiley Blackwell, vol. 31(9), pages 1226-1252, 09.
  5. Carmen M. Reinhart, 2000. "Mirage of Floating Exchange Rates," American Economic Review, American Economic Association, vol. 90(2), pages 65-70, May.
  6. William R. Cline, 2005. "United States as a Debtor Nation, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 3993.
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