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Working Paper
Flying geese or sitting ducks: China’s impact on the trading fortunes of other Asian economies
This paper updates our earlier work (Ahearne, Fernald, Loungani and Schindler, 2003) on whether China, with its huge pool of labor and an allegedly undervalued exchange rate, is hurting the export performance of other emerging market economies in Asia. We continue to find that while exchange rates matter for export performance, the income growth of trading partners matters far more. This suggests the potential for exports of all Asian economies to grow in harmony as long as global growth is strong. We also examine changes in export shares of Asian economies to the U.S. market and find ...
Journal Article
The Chinese renminbi: what’s real, what’s not
China's recent devaluation and liberalization of its exchange-rate policies will, at best, have only a temporary impact on its trade competitiveness with the United States. The type of exchange-rate regime that a country adopts matters little for its long-term international competitiveness. In addition, the recent focus on China's exchange rate diverts attention from the real problem: China?s command economy.
Journal Article
RMB appreciation and U.S. inflation risk
If oil prices continue to rise and the RMB continues to appreciate, the U.S. inflation rate may increase at a faster pace in the near future. And this would have an unwelcome impact on consumers? wallets.
Working Paper
Exchange-rate effects on China’s trade: an interim report
Though China's share of world trade is comparable to that of Japan, little is known about the response of China's trade to changes in exchange rates. The few estimates available suffer from two limitations. First, the data for trade prices are based on proxies for prices from other countries. Second, the estimation sample includes the period of China's transformation from a centrally-planned economy to a market-oriented system. To address these limitations, this paper develops an empirical model explaining the shares of China's exports and imports in world trade in terms of the real effective ...
Journal Article
Nondeliverable forwards: can we tell where the renminbi is headed?
Since the early 1990s, international banks have been offering nondeliverable forward (NDF) contracts to clients who need to hedge exposures in currencies of emerging-market economies. Many also use the exchange rate on these contracts as a best guess of where the emerging-market currency is headed. The exchange rates on NDFs, however, likely embody a substantial risk premium that interferes with forecasting accuracy.
Working Paper
Exchange-rate effects on China's trade: an interim report
The rising current account deficit in the USA has attracted considerable attention in recent years. We use the "business cycle accounting" methodology to identify the principal distortions that have affected the external accounts of the US. In particular, we measure distortions in the optimality conditions of a simple two-country general equilibrium model using data from the US and the other G7 countries. We then feed these measured distortions into the model individually and use the simulated counterfactual paths of the current account to determine the contribution of each of these ...
Journal Article
A look at China's new exchange rate regime
In this Economic Letter, the author reviews several characteristics of the new renminbi regime. He also examines how the renminbi might have moved in the past if this regime had been in place. Because the PBOC provided only guidelines, and not specifics, about the composition and trade weights of the reference basket, he constructs three likely indexes and compares their movements with each other and with the bilateral renminbi-U.S. dollar exchange rate. He finds that movements in China's trade-weighted exchange rate indexes over the long term are relatively insensitive to currency ...