China's Equilibrium Real Exchange Rate: A Counterfactual Analysis
Date
2008
Authors
Tyers, Rod
Bain, Iain
Bu, Yongxiang
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Volume Title
Publisher
Blackwell Publishing Ltd
Abstract
China's 'equilibrium' real effective exchange rate is explored using an adaptation of the Devarajan-Lewis-Robinson three-good general equilibrium model under a variety of assumptions about the balance of trade. The absence of secondary indices of import and export prices necessitates their construction from trade data. Some undervaluation is suggested in the lead-up to and during the financial crisis, due in part to an extraordinary accumulation of foreign reserves following exchange rate integration in 1994. If, instead, China had run a more typical trade balance prior to the crisis its real effective exchange rate would have been higher by about a tenth.
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Keywords
Keywords: balance of trade; export; financial crisis; general equilibrium analysis; import; real exchange rate; three-dimensional modeling; Asia; China; Eurasia; Far East
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Source
Pacific Economic Review
Type
Journal article
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Restricted until
2037-12-31
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