IDEAS home Printed from https://ideas.repec.org/p/iie/wpaper/wp05-2.html
   My bibliography  Save this paper

China's Role in the Revived Bretton Woods System: A Case of Mistaken Identity

Author

Listed:
  • Morris Goldstein

    ()

  • Nicholas R. Lardy

    () (Peterson Institute for International Economics)

Abstract

This paper argues that the way in which China is portrayed in the revived Bretton Woods thesis (BW2) is not consistent with several important trends in, and features of, the Chinese economy; nor does the strategy in the BW2 seem sensible for China's long-term economic development. Whether it is the behavior of China's real exchange rate, the costs of sterilizing large reserve inflows, the role that FDI plays in financing China's fixed asset investment, the participation of foreign firms in China's exports and in the ownership of export industries, or the political economy of trade protectionism in the United States, the BW2 does not provide a good explanation either for how China has behaved in the past or how it should behave in the future. We conclude that the BW2 does not provide a persuasive story for why large US current account deficits and undervalued Asian exchange rates can or should continue for the next decade or longer.

Suggested Citation

  • Morris Goldstein & Nicholas R. Lardy, 2005. "China's Role in the Revived Bretton Woods System: A Case of Mistaken Identity," Working Paper Series WP05-2, Peterson Institute for International Economics.
  • Handle: RePEc:iie:wpaper:wp05-2
    as

    Download full text from publisher

    File URL: https://www.piie.com/publications/working-papers/chinas-role-revived-bretton-woods-system-case-mistaken-identity
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Morris Goldstein, 2004. "Adjusting China's Exchange Rate Policies," Working Paper Series WP04-1, Peterson Institute for International Economics.
    2. Michael P. Dooley & David Folkerts-Landau & Peter M. Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
    3. Morris Goldstein & Nicholas R. Lardy, 2004. "What Kind of Landing for the Chinese Economy?," Policy Briefs PB04-07, Peterson Institute for International Economics.
    4. Michael P. Dooley & David Folkerts-Landau & Peter M. Garber, 2004. "The US Current Account Deficit and Economic Development: Collateral for a Total Return Swap," NBER Working Papers 10727, National Bureau of Economic Research, Inc.
    5. Barry Eichengreen, 2010. "Global Imbalances and the Lessons of Bretton Woods," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262514141, February.
    6. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2007. "Direct Investment, Rising Real Wages and the Absorption of Excess Labor in the Periphery," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 103-132, National Bureau of Economic Research, Inc.
    7. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries," NBER Working Papers 10332, National Bureau of Economic Research, Inc.
    8. Matthew Higgins & Thomas Klitgaard, 2004. "Reserve accumulation: implications for global capital flows and financial markets," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 10(Sep).
    9. William R. Cline, 2005. "United States as a Debtor Nation, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 3993, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nouriel Roubini, 2006. "The BW 2 regime: an unstable disequilibrium bound to unravel," International Economics and Economic Policy, Springer, vol. 3(3), pages 303-332, December.
    2. Morris Goldstein, 2005. "What Might the Next Emerging-Market Financial Crisis Look Like?," Working Paper Series WP05-7, Peterson Institute for International Economics.
    3. Pingfan Hong & Rob Vos & Keping Yao, 2008. "How China Could Contribute to a Benign Global Rebalancing?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(5), pages 35-50, September.
    4. Faruqee, Hamid & Laxton, Douglas & Muir, Dirk & Pesenti, Paolo, 2008. "Would protectionism defuse global imbalances and spur economic activity? A scenario analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2651-2689, August.
    5. Kenen, Peter B., 2005. "Stabilizing the international monetary system," Journal of Policy Modeling, Elsevier, vol. 27(4), pages 487-493, June.
    6. Nouriel Roubini & Brad Setser, 2005. "The Sustainability of the US External Imbalances," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 6(1), pages 08-15, April.
    7. Nouriel Roubini & Brad Setser, 2005. "Will the Bretton Woods 2 regime unravel soon? the risk of a hard landing in 2005-2006," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
    8. Steinherr, Alfred & Cisotta, Alessandro & Klar, Erik & Sehovic, Kenan, 2006. "Liberalizing Cross-Border Capital Flows: How Effective Are Institutional Arrangements against Crisis in Southeast Asia," Working Papers on Regional Economic Integration 6, Asian Development Bank.
    9. Herrmann, Sabine & Winkler, Adalbert, 2009. "Real convergence, financial markets, and the current account - Emerging Europe versus emerging Asia," The North American Journal of Economics and Finance, Elsevier, vol. 20(2), pages 100-123, August.
    10. Barry Eichengreen, 2008. "Should there be a coordinated response to the problem of global imbalances? Can there be one?," Working Papers 69, United Nations, Department of Economics and Social Affairs.
    11. Campbell, Douglas L., 2020. "Relative Prices and Hysteresis: Evidence from US Manufacturing," European Economic Review, Elsevier, vol. 129(C).
    12. Michael P. Dooley & David Folkerts-Landau & Peter M. Garber, 2006. "Interest rates, exchange rates and international adjustment," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 51.
    13. Sabine Herrmann & Adalbert Winkler, 2009. "Financial markets and the current account: emerging Europe versus emerging Asia," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(3), pages 531-550, October.
    14. Robert C. Feenstra & Chang Hong, 2010. "China's Exports and Employment," NBER Chapters, in: China's Growing Role in World Trade, pages 167-199, National Bureau of Economic Research, Inc.
    15. Harold James, 2013. "The multiple contexts of Bretton Woods," Oxford Review of Economic Policy, Oxford University Press, vol. 28(3), pages 411-430, AUTUMN.
    16. Edwin M. Truman, 2005. "Postponing Global Adjustment: An Analysis of the Pending Adjustment of Global Imbalances," Working Paper Series WP05-6, Peterson Institute for International Economics.
    17. Lars Calmfors & Giancarlo Corsetti & Seppo Honkapohja & John Kay & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2006. "Chapter 2: Global Imbalances," EEAG Report on the European Economy, CESifo, vol. 0, pages 50-67, March.
    18. Piti Disyatat & Surach Tanboon, 2005. "When Global Imbalances Unwind: Challenges for the Asian Region," Working Papers 2005-01, Monetary Policy Group, Bank of Thailand.
    19. Xafa, Miranda, 2007. "Global imbalances and financial stability," Journal of Policy Modeling, Elsevier, vol. 29(5), pages 783-796.
    20. Barry Eichengreen, 2005. "Sterling's Past, Dollar's Future: Historical Perspectives on Reserve Currency Competition," NBER Working Papers 11336, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    China's exchange rate policies; revived Bretton Woods system; Chinese economy;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iie:wpaper:wp05-2. 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: (Peterson Institute webmaster). General contact details of provider: https://edirc.repec.org/data/iieeeus.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.