Does U.S. Pressure Lead to Changes in China’s Exchange Rate?

Paul Bowles and Baotai Wang

International Journal of Political Economy, 2016, vol. 45, issue 2, 147-166

Abstract: The role of external political pressure in the appreciation of the Chinese renminbi against the U.S. dollar since 2005 has been the subject of debate. While Chinese authorities maintain that only domestic considerations have played a role, whether the appreciation has also been the result of the exercise of international monetary power by the United States has been examined using three different approaches. The results have been contradictory with the weight of studies finding against U.S. pressure having an effect on the exchange rate. In this article, we use Granger causality tests to reexamine the issue using data from 2000–2014. We find evidence that U.S. pressure does Granger-cause renminbi appreciation. We also examine whether U.S. pressure causes the changes in China’s export tax rebates. We find no evidence for this.

Date: 2016
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DOI: 10.1080/08911916.2016.1185318

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