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China's Growth, Stability, and Use of International Reserves

  • Joshua Aizenman
  • Yothin Jinjarak
  • Nancy P. Marion

Since the onset of the global financial crisis, China and the U.S. have reduced their current-account imbalances as a share of GDP to less than half their pre-crisis levels. For China, the reduction in its current-account surplus post-crisis suggests a structural change. Panel regressions for a sample of almost 100 countries over 1983-2013 confirm that the relationship between current-account balances and economic variables changed in important ways after the financial crisis. China's rebalancing has been accompanied by a decline in its reserves-to-GDP ratio and greater outward FDI that, in turn, has mitigated reserve hoarding.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19739.

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Date of creation: Dec 2013
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Publication status: published as Joshua Aizenman & Yothin Jinjarak & Nancy Marion, 2014. "China’s Growth, Stability, and Use of International Reserves," Open Economies Review, Springer, vol. 25(3), pages 407-428, July.
Handle: RePEc:nbr:nberwo:19739
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  1. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
  2. Caballero, Ricardo J & Farhi, Emmanuel & Gourinchas, Pierre-Olivier, 2006. "An Equilibrium Model of "Global Imbalances" and Low Interest Rates," Center for International and Development Economics Research, Working Paper Series qt7xc0g8mm, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
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  7. Gruber, Joseph W. & Kamin, Steven B., 2007. "Explaining the global pattern of current account imbalances," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 500-522, June.
  8. Joshua Aizenman & Jaewoo Lee, 2006. "Financial Versus Monetary Mercantilism-Long-run View of Large International Reserves Hoarding," NBER Working Papers 12718, National Bureau of Economic Research, Inc.
  9. Joshua Aizenman & Nancy P. Marion, 2002. "The high demand for international reserves in the Far East: what's going on?," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
  10. Joshua Aizenman & Yothin Jinjarak, 2009. "The Usa As The 'Demander Of Last Resort' And The Implications For China'S Current Account," Pacific Economic Review, Wiley Blackwell, vol. 14(3), pages 426-442, 08.
  11. 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.
  12. Joshua Aizenman & Jaewoo Lee, 2007. "International Reserves: Precautionary Versus Mercantilist Views, Theory and Evidence," Open Economies Review, Springer, vol. 18(2), pages 191-214, April.
  13. Aizenman, Joshua & Marion, Nancy P., 2003. "International Reserve Holdings with Sovereign Risk and Costly Tax Collection," Santa Cruz Department of Economics, Working Paper Series qt9s7978n1, Department of Economics, UC Santa Cruz.
  14. Maurice Obstfeld & Kenneth S. Rogoff, 2005. "Global Current Account Imbalances and Exchange Rate Adjustments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(1), pages 67-146.
  15. Joshua Aizenman & Yi Sun, 2008. "Globalization and the Sustainability of Large Current Account Imbalances: Size Matters," NBER Working Papers 13734, National Bureau of Economic Research, Inc.
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  17. Joshua Aizenman & Gurnain Kaur Pasricha, 2013. "Why do emerging markets liberalize capital outflow controls? Fiscal versus net capital flow concerns," NBER Working Papers 18879, National Bureau of Economic Research, Inc.
  18. Martin Feldstein, 2008. "Resolving the Global Imbalance: The Dollar and the U.S. Saving Rate," Journal of Economic Perspectives, American Economic Association, vol. 22(3), pages 113-25, Summer.
  19. repec:dgr:uvatin:2011126 is not listed on IDEAS
  20. 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.
  21. Feldstein, Martin, 2008. "Resolving the Global Imbalance: The Dollar and the U.S. Saving Rate," Scholarly Articles 2792081, Harvard University Department of Economics.
  22. Olivier Jeanne, 2007. "International Reserves in Emerging Market Countries: Too Much of a Good Thing?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 38(1), pages 1-80.
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