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The Oxford Companion to the Economics of China$
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Shenggen Fan, Ravi Kanbur, Shang-Jin Wei, and Xiaobo Zhang

Print publication date: 2014

Print ISBN-13: 9780199678204

Published to Oxford Scholarship Online: December 2014

DOI: 10.1093/acprof:oso/9780199678204.001.0001

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The Chinese exchange rate and global imbalances

The Chinese exchange rate and global imbalances

20 The Chinese exchange rate and global imbalances
The Oxford Companion to the Economics of China

Menzie D. Chinn

Oxford University Press

This chapter assesses the role of China’s current account and exchange rate in the development of global imbalances, in the context of standard models of current account balances, as well as recent interpretations (e.g. the ‘savings glut’ and ‘safe asset shortage’). The exchange rate is interpreted as an equilibrium price. The evidence for how the exchange rate affects the trade balance is reviewed, in a partial equilibrium framework. The empirical evidence supports the view that exchange rate movements can affect the volume of trade flows.

Keywords:   financial liberalization, globalization, global imbalances, capital controls, institutional development

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