Under the world dollar standard, a discrete appreciation by a dollar creditor country of the United States, such as China or Japan, has no predictable effect on its trade surplus. Currency appreciation by the creditor...Under the world dollar standard, a discrete appreciation by a dollar creditor country of the United States, such as China or Japan, has no predictable effect on its trade surplus. Currency appreciation by the creditor country will slow its economic growth and eventually cause deflation but cannot compensate for a saving-investment imbalance in the United States. Under a fixed exchange rate, however, differential adjustment in the rate of growth of money wages will more accurately reflect international differences in productivity growth. International competitiveness will be better balanced between high-growth and low-growth economies, as between Japan and the U.S. from 1950 to 1971 and China and the U.S. from 1994 to 2005, when the peripheral country＇s dollar exchange rate is fixed so that its wage growth better reflects its higher productivity growth. The qualified case for China moving toward greater flexibility in the form of a very narrow band for the yuan/dollar exchange rate, as a way of decentralizing foreign exchange transacting, is discussed.展开更多
Since 2014, capital inflows into China have turned into capital outflows, reversing the gradual appreciation path of the renminbi against the US dollar into an erratic depreciation path. The paper explains the current...Since 2014, capital inflows into China have turned into capital outflows, reversing the gradual appreciation path of the renminbi against the US dollar into an erratic depreciation path. The paper explains the current capital ouows by comparing China and Japan with respect to the impact of exchange rate expectations on speculative capital flows. It is argued that both in China and Japan, given benign liquidity conditions in the USA, policy-induced appreciation expectations have generated capital inflows that have contributed to overinvestment and financial market bubbles. The current reversal of capital flows is seen as a signal that the bubble in China has burst. To stabilize growth in China and to discourage speculative capital ouows a fixed exchange rate to the dollar is recommended. Given Japan＇s experience and given that China＇s foreign assets remain high, the depreciation pressure on the Chinese renminbi can be expected to abate.展开更多
文摘Under the world dollar standard, a discrete appreciation by a dollar creditor country of the United States, such as China or Japan, has no predictable effect on its trade surplus. Currency appreciation by the creditor country will slow its economic growth and eventually cause deflation but cannot compensate for a saving-investment imbalance in the United States. Under a fixed exchange rate, however, differential adjustment in the rate of growth of money wages will more accurately reflect international differences in productivity growth. International competitiveness will be better balanced between high-growth and low-growth economies, as between Japan and the U.S. from 1950 to 1971 and China and the U.S. from 1994 to 2005, when the peripheral country＇s dollar exchange rate is fixed so that its wage growth better reflects its higher productivity growth. The qualified case for China moving toward greater flexibility in the form of a very narrow band for the yuan/dollar exchange rate, as a way of decentralizing foreign exchange transacting, is discussed.
文摘Since 2014, capital inflows into China have turned into capital outflows, reversing the gradual appreciation path of the renminbi against the US dollar into an erratic depreciation path. The paper explains the current capital ouows by comparing China and Japan with respect to the impact of exchange rate expectations on speculative capital flows. It is argued that both in China and Japan, given benign liquidity conditions in the USA, policy-induced appreciation expectations have generated capital inflows that have contributed to overinvestment and financial market bubbles. The current reversal of capital flows is seen as a signal that the bubble in China has burst. To stabilize growth in China and to discourage speculative capital ouows a fixed exchange rate to the dollar is recommended. Given Japan＇s experience and given that China＇s foreign assets remain high, the depreciation pressure on the Chinese renminbi can be expected to abate.
