Dynamic Transition of the Exchange Rate Regime in the Peopleâ€™s Republic of China
Naoyuki Yoshino (),
Sahoko Kaji and
Tamon Asonuma ()
Macroeconomics Working Papers from East Asian Bureau of Economic Research
This paper analyzes the optimal transition of the exchange rate regime in the Peopleâ€™s Republic of China (PRC). How the PRC can successfully reach the desired regimeâ€”whether a basket peg or floating regimeâ€”from the current dollar-peg regime remains a major question. To answer it, we develop a dynamic small open-economy general equilibrium model. We construct four transition policies toward the basket-peg or floating regime and compare the welfare gains of these policies to those of maintaining the dollar-peg regime. Quantitative analysis using PRC data from Q1 1999 to Q4 2010 leads to two conclusions. First, a gradual adjustment toward a basket-peg regime seems the most appropriate option for the PRC, and would minimize the welfare losses associated with a shift in the exchange rate regime. Second, a sudden shift to a basket peg is the second-best solution. This is preferable to a sudden shift to a floating regime, since it would enable the authorities to implement optimal weights efficiently in order to achieve policy goals once a decision has been made to adopt a basket-peg regime.
Keywords: exchange rate regime; PRC; China; dollar-peg regime; basket-peg regime; floating regime; general equilibrium model (search for similar items in EconPapers)
JEL-codes: E42 F33 F41 F42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-mac, nep-mon, nep-opm and nep-tra
References: Add references at CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.eaber.org/node/24159 [301 Moved Permanently]--> https://www.eaber.org/node/24159 [301 Moved Permanently]--> https://eaber.org/node/24159)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eab:macroe:24159
Access Statistics for this paper
More papers in Macroeconomics Working Papers from East Asian Bureau of Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Shiro Armstrong ().