The Inflexible Yuan and Global Imbalances

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Title The Inflexible Yuan and Global Imbalances
Author Makin, Anthony John
Journal Name Global Economy Journal
Editor Alfred E Eckes (Editor-in-Chief)
Year Published 2008
Place of publication United States
Publisher Berkeley Electronic Press
Abstract This paper evaluates China's exchange rate policy and current account surplus in the context of its rapid development. Recognizing that external imbalances reflect divergent national production and expenditure growth within both China and its trading partners, it contends that yuan exchange rate undervaluation against major currencies is central to any explanation of global imbalances. This misalignment artificially assists China's output growth and limits its household consumption, thereby slowing the rise in China's living standards. Meanwhile, due to currency misalignment, China's industrialized trading partners, most notably the United States and European Union, simultaneously experience larger bilateral current account deficits with China, lower output, lower saving and higher investment than otherwise. Further significant appreciation of China's exchange rate would simultaneously reduce China's huge trade surplus and the bilateral deficits of its trading partners, thereby alleviating international trade tensions.
Peer Reviewed Yes
Published Yes
Publisher URI http://www.bepress.com/index.html
Alternative URI http://dx.doi.org/10.2202/1524-5861.1403
Copyright Statement Copyright 2008 Berkeley Electronic Press. The attached file is reproduced here in accordance with the copyright policy of the publisher.
Volume 8
Issue Number 3
Page from 1
Page to 10
ISSN 1553-5304
Date Accessioned 2009-05-05
Language en_AU
Faculty Griffith Business School
Subject Macroeconomics (incl Monetary and Fiscal Theory)
URI http://hdl.handle.net/10072/23081
Publication Type Journal Articles (Refereed Article)
Publication Type Code c1

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