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Title:China's exchange rate impasse and the weak U.S. dollar PDF Logo
Authors:McKinnon, Ronald
Schnabl, Gunther
Issue Date:2008
Series/Report no.:Working Paper // Universität Leipzig 73
Abstract:In assessing Alexander Swoboda's great influence on economics, two themes stand out: the determinants of global inflation, particularly in the 1970s, and the choice of an exchange rate regime consistent with domestic monetary and fiscal policies. Although seemingly narrowly focused on China, our contribution to Alexander's fete straddles both themes. Since 2004, China has been backed into a situation where the renminbi is expected to go ever higher against the dollar, and this one-way bet has led to a loss of domestic monetary control. Combined with a more general flight from the U.S. dollar, the resulting monetary explosion in China contributes to the worldwide increase in primary commodity prices - with excess liquidity reminiscent of the global inflation generated by the weak dollar in the 1970s.
Subjects:Inflation
Exchange Rates
Macro Policies
Current Account Imbalances
JEL:E31
E61
F31
Document Type:Working Paper
Appears in Collections:Working Papers, Universität Leipzig

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