Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/141879
Authors: 
Schnabl, Gunther
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 5902
Abstract: 
The paper argues that persistent current account surpluses and increasing foreign currency-denominated asset positions constitute long-term appreciation expectations on yuan and yen, which have made China and Japan vulnerable to U.S. interest rate cuts and appreciation expectation shocks. For both China and Japan – at different points of time – self-fulfilling runs into yuan and yen have triggered monetary policy expansions, which are identified as the breeding ground for overinvestment, speculative bubbles and post-bubble secular stagnation. To prevent a similar scenario for China capital controls, a tighter monetary policy and a fixed exchange rate regime are recommended.
Subjects: 
China
Japan
exchange rate policy
bubble economy
overinvestment
Hayek low interest rate policy
secular stagnation
capital controls
rebalancing
JEL: 
E32
E42
E58
Document Type: 
Working Paper

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