China and its Dollar Exchange Rate: A Worldwide Stabilizing Influence?

Ronald McKinnon and Gunther Schnabl

No 3449, CESifo Working Paper Series from CESifo

Abstract: We argue that criticism concerning the Chinese dollar peg is misplaced as no predictable link exists between the exchange rate and the trade balance of an international creditor economy. The stable nominal yuan/dollar rate is argued to have stabilized Chinese, East Asian and global growth. However, linked to US low interest rates, Chinese sterilization policies and potentially subsidized capital allocation in China the real yuan/dollar rate is undervalued. This has caused—both in China and the United States— structural distortions and threatens to undermine global growth and stability. We propose Sino-American policy coordination to escape from the policy dilemma, which continues to drive global imbalances.

Keywords: China; exchange rate; financial stability; economic stability; international policy coordination; currency war (search for similar items in EconPapers)
JEL-codes: F15 F31 F33 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp3449.pdf (application/pdf)

Related works:
Journal Article: China and Its Dollar Exchange Rate: A Worldwide Stabilising Influence? (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3449

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().