The Dynamics of Real Interest Rates, Real Exchange Rates and the Balance of Payments in China: 1980-2002

Zhongxia Jin

No 2003/067, IMF Working Papers from International Monetary Fund

Abstract: Based on China's experience between 1980 and 2002, a cointegrated vector autoregression model was established to explore the relationships among real interest rates, real exchange rates and balance of payments in China. Taking into account institutional changes, the empirical study shows that significant and usually non-monotonic interactions exist between these three variables. The paper discusses theoretical and policy implications of the empirical result.

Keywords: WP; nominal exchange rate; Interest Rates; Exchange Rates; China; real interest rate differential; equilibrium exchange rate; misalignment in China; exchange rate system; swap market; single-equation approach; discussed exchange rate policy; managed float; Real exchange rates; Real interest rates; International reserves; Exchange rate arrangements (search for similar items in EconPapers)
Pages: 28
Date: 2003-04-01
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Citations: View citations in EconPapers (7)

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