Real Exchange Rate Anomalies in China: Sterilization by the People and Trade Liberalization
1
조회
0
다운로드
2
인용
0
참고문헌
키워드
초록
When a fixed exchange rate country is faced with a sudden increase in foreign exchange inflows, its economy would normally experience higher inflation and real exchange rate appreciation. Between 1998 and 2006, however, China underwent a period of surging influx of foreign exchange and accumulation of vast reserves with little inflation or changes in the real exchange rate. Instead of sterilization by the central bank, this paper argues that the small change was largely due to “sterilization by the people”—the public voluntarily increased their holdings of monetary balances because of a rise in income or change in preferences—hence alleviating the inflationary pressure on the economy. In addition, the easing of import restrictions also helped offset some of the extra foreign exchange coming into China. An open economy model that highlights the role of the monetary approach is used to demonstrate how increased money demand and trade liberalization can mitigate the impact of the inflows on the domestic price level and the real exchange rate.
Abstract
When a fixed exchange rate country is faced with a sudden increase in foreign exchange inflows, its economy would normally experience higher inflation and real exchange rate appreciation. Between 1998 and 2006, however, China underwent a period of surging influx of foreign exchange and accumulation of vast reserves with little inflation or changes in the real exchange rate. Instead of sterilization by the central bank, this paper argues that the small change was largely due to “sterilization by the people”—the public voluntarily increased their holdings of monetary balances because of a rise in income or change in preferences—hence alleviating the inflationary pressure on the economy. In addition, the easing of import restrictions also helped offset some of the extra foreign exchange coming into China. An open economy model that highlights the role of the monetary approach is used to demonstrate how increased money demand and trade liberalization can mitigate the impact of the inflows on the domestic price level and the real exchange rate.
참고문헌 (28)
- Blejer, M. I., "Devaluation, inflation, and the balance of payments : A short-run monetary approach", Economic Record, 55(148), pp.33~40 (1979)
- Burdekin, R. C. K., "What has driven Chinese monetary policy since 1990? Investigating the People's bank's policy rule", Journal of International Money and Finance, 27(5), pp.847~859 (2008)
- Calvo, G. A., "Capital inflows and real exchange rate appreciation in Latin America : The role of external factors", International Monetary Fund Staff Papers, 40(1), pp.108~151 (1993)
- Chan, M. S., "Real exchange rate adjustments to foreign exchange inflows in a fixed exchange rate system", Journal of Economics and Economic Education Research
- Dornbusch, R., "The Monetary Approach to the Balance of Payments", pp.168~186 (1973), Allen and Unwin
- Edwards, S., "Capital flows, real exchange rates, and capital controls: Some Latin American experiences, In Capital flows and the emerging economies: Theory, evidence, and controversies", NBER Conference Report series, pp.197~246 (2000)
- Frenkel, J. A., "Handbook of International Economics, 2" (1985), North Holland
- Harberger, A., "Economic Adjustment and Exchange Rates in Developing Countries" (1986), University of Chicago Press
- Harberger, A. C., "Lessons from monetary and real exchange rate economics", Cato Journal, 28(2), pp.225~235 (2008)
- Asia and Pacific regional economic outlook: Building a sustained recovery, "International Monetary Fund", nternational Monetary Fund, ~ (2009)
- (2015)[URL]
- Saving in Asia and issues for rebalancing growth, "Jha, S", ADB, ~, pp.ADB Economics Working Paper Series, No.161 (2009)
- China: Toward a consumption-driven growth path, "Lardy, N. R.", Institute for International Economics, ~, pp.Institute for International Economics Policy Brief, 06-6 (2006)
- Ma, G., "China’s high saving rate : myth and reality", International Economics, 122, pp.5~40 (2010)
- Ma, G., "China's evolving reserve requirements", Journal Of Chinese Economic And Business Studies, 11(2), pp.117~137 (2013)
- China needs to float the yuan—for China’s sake, "Makin, J.", American Enterprise Institute for Public Policy Research Economic Outlook, ~ (2006)
- Polak, J. J., "Economic theory and financial policy: Selected essays of Jacques J. Polak, 1994-2004", pp.227~248 (2005), Sharpe
- Putting the cart before the horse? Capital account liberalization and exchange rate flexibility in China, "Prasad, E. S.", IMF, ~, pp.IMF Policy Discussion Paper, 05 (2005), 1
- Santos-Paulino, A. U., "The effects of trade liberalization on imports in selected developing countries", World Development, 30(6), pp.959~974 (2002)
- Saxena, S., "Currency crises and capital control:A survey", Unpublished manuscript, ~ (1999)
- (2015)[URL]
- Wang, H., "Present situation of road traffic accident in China and its characteristics", China Safety Science Journal, 19(10), pp.121~126 (2009)
- Wang, H., "Factors contributing to high costs and inequality in China’s health care system", Journal of the American Medical Association, 298(16), pp.1928~1930 (2007)
- Wang, Y., "Effectiveness of capital controls and sterilizations in China", China and World Economy, 18(3), pp.106~124 (2010)
- Liquidity and welfare in a heterogeneous-agent economy, "Wen, Y.", Federal Reserve Bank of St. Louis, ~, pp.No. 2009-019B (2009)
- Explaining China’s trade imbalance puzzle, "Wen, Y.", Federal Reserve Bank of St. Louis, ~, pp.No. 2011-018A (2011)
- Xing, J. J., "Fatigue and accidents of underground coal miners in China", China Safety Science Journal, 6(5), pp.31~34 (1996)
- Xu, L., "Urban health insurance reform and coverage in China using data from National Health Services Surveys in 1998 and 2003", BMC Health Services Research, pp.7~37 (2007)