TY  - JOUR
AU  - Shi, Jianhuai
TI  - Are Currency Appreciations Contractionary in China?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12551
PY  - 2006
Y2  - October 2006
DO  - 10.3386/w12551
UR  - http://www.nber.org/papers/w12551
L1  - http://www.nber.org/papers/w12551.pdf
N1  - Author contact info:
Jianhuai Shi
Peking University
China
E-Mail: jhshi@ccer.pku.edu.cn
M1  - published as Jianhuai Shi. "Are Currency Appreciations Contractionary in China?," in Takatoshi Ito and Andrew K. Rose, editors, "International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy" University of Chicago Press (2008)

M3  - presented at "East Asian Seminar on Economics", June 22-24, 2006
AB  - The Chinese economy has been in a state of external and internal imbalances for some years, which has something to do with the undervaluation of renminbi (RMB). But the Chinese Government hesitates to allow RMB to appreciate because of the worry that RMB appreciations are contractionary thus have negative impact on China's economic growth and employment. The purpose of this paper is to empirically assess the effects of RMB real exchange rate on China's output. The econometric results of the paper show that (1) even after source of spurious correlation is controlled for, RMB appreciation has led to a decline in China's output, suggesting that RMB appreciations are contractionary, and that (2) once the international finance linkage of Chinese economy is accounted for, the effect of RMB real exchange rate shocks on China's output and the power of the shocks in explaining the change of China's output are diminished. The paper gives some possible explanations to those findings, and points out that the findings do not necessarily imply that China should continue maintaining the undervaluation of RMB.
ER  -