The US-China Trade Imbalance: Will Revaluing the RMB Help (Much)?

Nicholaas Groenewold () and Lei He
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Nicholaas Groenewold: UWA Business School, University of Western Australia
Lei He: UWA Business School, University of Western Australia

No 06-27, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: The large US-China trade imbalance is a common cause for concern and regularly blamed on the undervaluation of the RMB. We estimate a simple model of the trade balance and simulate the long-run effects on the trade balance of RMB revaluations in the range of 10-50%. We find that improvements in the trade balance following plausible revaluations are likely to be modest.

Pages: 10 pages
Date: 2006
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