American Economic Review Vol. 96 No. 2 2006
China's Exchange Rate Policy Dilemma
Abstract
This paper summarizes key aspects of China’s exchange rate policy, outlines the problems it creates for both China and the global economy, and proposes a feasible policy compromise. China’s Currency Regime On July 21, 2005, China announced a 2.1 percent appreciation of the Renminbi (RMB) against the US dollar, a move to a managed float, and a number of other “reforms. ” Most of these “reforms ” simply reiterated long-standing arrangements: since 1994 China has identified its currency regime as a managed float and has set a 0.3 percent per day fluctuation limit (in either direction) for the RMB against the dollar (vis-à-vis the central parity). The July 21 st announcement, however, did pledge two potentially important alterations: (i) the RMB was henceforth to be managed “with reference to a basket of currencies ” rather than being pegged to the dollar; and (ii) the exchange rate was to become “more flexible, ” with its value based more on “market supply and demand.” In practice, the July 21 st reforms have so far had little visible effect. As of mid-
- DOI
- 10.1257/000282806777212512
- Volume
- 96
- Issue
- 2
- Pages
- 422-426
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref