Exchange rate movements and aggregate output: the case of China

Yu Hsing

International Journal of Trade and Global Markets, 2020, vol. 13, issue 2, 135-143

Abstract: Applying an extended IS-MP-AS model (Romer, 2000), this paper finds that real GDP in China has a positive relationship with real depreciation during 1990-2005 and the real stock price and a negative relationship with real depreciation during 2006-2016, the lagged US real interest rate, the real oil price and the expected inflation rate. Therefore, during 1990-2005, the benefits of real depreciation such as more exports overwhelmed the costs of real depreciation such as higher import costs, higher inflation and less capital inflows whereas during 2006-2016, the benefits of real appreciation such as lower import costs, lower inflation, and more capital inflows dominated its negative effects such as less exports.

Keywords: currency depreciation or appreciation; deficit spending; stock prices; world interest rates; oil prices. (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijtrgm:v:13:y:2020:i:2:p:135-143

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