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The People's Republic of China's Growth, Stability, and Use of International Reserves

Author

Listed:
  • Aizenman, Joshua

    (Asian Development Bank Institute)

  • Jinjarak, Yothin

    (Asian Development Bank Institute)

  • Marion, Nancy P.

    (Asian Development Bank Institute)

Abstract

In the run-up to the financial crisis, the world economy was characterized by large and growing current account imbalances. Since the onset of the crisis, the People’s Republic of China and the United States have rebalanced. As a share of gross domestic product, their current account imbalances are now less than half their pre-crisis levels. For the People’s Republic of China, the reduction in its current account surplus post-crisis suggests a structural change. Panel regressions for a sample of almost 100 economies over the thirty-year period, 1983–2013, confirm that the relationship between current account balances and economic variables such as performance, structure, wealth, and the exchange rate, changed in important ways after the financial crisis.

Suggested Citation

  • Aizenman, Joshua & Jinjarak, Yothin & Marion, Nancy P., 2014. "The People's Republic of China's Growth, Stability, and Use of International Reserves," ADBI Working Papers 455, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0455
    as

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    File URL: http://www.adbi.org/files/2014.01.24.wp455.prc.growth.stability.international.reserves.pdf
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    References listed on IDEAS

    as
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    4. 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.
    5. Jiandong Ju & Shang-Jin Wei, 2010. "Domestic Institutions and the Bypass Effect of Financial Globalization," American Economic Journal: Economic Policy, American Economic Association, vol. 2(4), pages 173-204, November.
    6. 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.
    7. Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2008. "An Equilibrium Model of "Global Imbalances" and Low Interest Rates," American Economic Review, American Economic Association, vol. 98(1), pages 358-393, March.
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    Cited by:

    1. Campbell, Douglas L., 2016. "Measurement matters: Productivity-adjusted weighted average relative price indices," Journal of International Money and Finance, Elsevier, vol. 61(C), pages 45-81.
    2. Andrea Fracasso, 2015. "Economic Rebalancing and Growth: the Japanese experience and China’s prospects," DEM Discussion Papers 2015/07, Department of Economics and Management.

    More about this item

    Keywords

    current account imbalances; structural change; financial crisis; PRC; international reserves;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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