China's Rapid Growth, Yuan Misalignment and Global Imbalances

Anthony Makin

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: This paper develops a new international monetary framework for analysing the domestic and international repercussions of China’s exchange rate policy in the context of its rapid development. This straightforward framework reveals that misalignment of the yuan against major currencies artificially assists China’s output growth, contributes to global imbalances and limits household consumption, slowing the rise in living standards. Meanwhile, China’s Western trading partners, most notably the United States and the European Union, simultaneously experience external deficits, lower output and saving due to exchange rate misalignment.

Keywords: output; expenditure; economic development; exchange rate misalignment; trading partners; global imbalances (search for similar items in EconPapers)
Pages: 24 pages JEL Classification: F32, F33, F43
Date: 2007-06
New Economics Papers: this item is included in nep-cba, nep-cna, nep-dev and nep-mon
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