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Options for China in a Dollar Standard World: A Sovereign Currency Approach

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  • L. Randall Wray
  • Xinhua Liu

Abstract

This paper examines the fiscal and monetary policy options available to China as a sovereign currency-issuing nation operating in a dollar standard world. We first summarize a number of issues facing China, including the possibility of slower growth, global imbalances, and a number of domestic imbalances. We then analyze current monetary and fiscal policy formation and examine some policy recommendations that have been advanced to deal with current areas of concern. We next outline the sovereign currency approach and use it to analyze those concerns. We conclude with policy recommendations consistent with the policy space open to China.

Suggested Citation

  • L. Randall Wray & Xinhua Liu, 2014. "Options for China in a Dollar Standard World: A Sovereign Currency Approach," Economics Working Paper Archive wp_783, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_783
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    File URL: http://www.levyinstitute.org/pubs/wp_783.pdf
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    References listed on IDEAS

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    1. Sabrina Auci & Laura Castellucci & Manuela Coromaldi, 2013. "Does cutting back the public sector improve efficiency? Some evidence from 15 European countries," CEIS Research Paper 274, Tor Vergata University, CEIS, revised 30 Apr 2013.
    2. Ito, Hiro & Volz, Ulrich, 2012. "The People’s Republic of China and Global Imbalances from a View of Sectorial Reforms," ADBI Working Papers 393, Asian Development Bank Institute.
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    Cited by:

    1. Felipe, Jesus & Lanzafame, Matteo & Zhuang, Juzhong, 2014. "The People’s Republic of China's Potential Growth Rate: The Long-Run Constraints," ADB Economics Working Paper Series 418, Asian Development Bank.
    2. Park, Cyn-Young & Mercado, Rogelio, 2015. "Financial Inclusion, Poverty, and Income Inequality in Developing Asia," ADB Economics Working Paper Series 426, Asian Development Bank.

    More about this item

    Keywords

    China; Policy Space; Fiscal and Monetary Policy; Sectoral Balances Approach; Minsky; Sovereign Currency; Modern Money Theory; Middle-Income Trap; Financial Instability;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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