The macroeconomic impacts of Chinese currency appreciation on China and the rest of world: A global computable general equilibrium analysis

Simla Tokgoz, Jun Yang and Wei Zhang (w.zhang@cgiar.org)

No 1178, IFPRI discussion papers from International Food Policy Research Institute (IFPRI)

Abstract: There has been contentious debate surrounding the issue of undervaluation of the Chinese Renminbi. Despite continuous international political pressure to appreciate its currency, the Chinese government has resisted significant changes. A key question underlining the debate is whether a Renminbi appreciation would deliver substantial gains for exports and employment as the United States has argued or a significant slowdown of Chinese economy as feared by the Chinese government, and if so to what extent. This paper analyzes the ex-ante, short-term impacts of the Chinese Renminbi appreciation on the Chinese and world economies using the novel approach of modeling nominal exchange rate adjustment in the Global Trade Analysis Project, a global computable general equilibrium model. Scenario results show that the Chinese economy will be affected negatively, with lower real gross domestic product, lower employment rates, and a decline in the trade surplus. Chinese currency appreciation has a positive impact on the GDP of the major countries and regions, but by a small margin. With a higher Chinese exchange rate, trade balances for other trading partner countries, with the exception of the United States, improve.

Keywords: Computable general equilibrium model; Exchange rate; Economic impacts; Renminbi appreciation (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cmp, nep-mon, nep-opm and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: THE MACROECONOMIC IMPACTS OF CHINESE CURRENCY APPRECIATION ON CHINA AND THE REST OF THE WORLD: A GLOBAL COMPUTABLE GENERAL EQUILIBRIUM ANALYSIS (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:fpr:ifprid:1178

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