Current Account Rebalancing and Real Exchange Rate Adjustment Between the U.S. and Emerging Asia
A reduction in the U.S. current account deficit vis-Ã -vis emerging Asia involves a shift in demand from U.S. to emerging Asia tradable goods and a change in international relative prices. This paper quantifies the required adjustment in the terms of trade and real exchange rates in a three-country open economy model of the U.S., China, and other emerging Asia. We compare scenarios where both Chinese and other emerging Asian export prices change by the same proportion to the case where export prices remain constant in one country and increase in the other. Our results are robust to different assumptions about elasticities of substitution and to introducing a high degree of vertical fragmentation in production in the model.
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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.:
- Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2009.
"China's Current Account and Exchange Rate,"
CESifo Working Paper Series
2587, CESifo Group Munich.
- Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2009. "China's Current Account and Exchange Rate," Working Papers 142009, Hong Kong Institute for Monetary Research.
- Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2009. "China's Current Account and Exchange Rate," NBER Working Papers 14673, National Bureau of Economic Research, Inc.
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