Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25765
Authors: 
McKinnon, Ronald
Schnabl, Gunther
Year of Publication: 
2006
Series/Report no.: 
CESifo working paper 1720
Abstract: 
China keeps its exchange rate tightly fixed to the dollar. Its productivity growth and trade surplus have been high, and it continues to accumulate large dollar reserves. Many observers take this as evidence that the renminbi is undervalued and should be appreciated to reduce the Chinese trade surplus. We argue that an appreciation of the renminbi need not reduce China's trade surplus but could cause serious deflation in China. To show this, we consider international adjustment between China and the United States from both an asset-market and a labor-market perspective, and compare this to Japan's unsuccessful appreciation of the yen.
JEL: 
F15
F31
F33
Document Type: 
Working Paper

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