The quest for determinants of Chinese exchange rate policy
Streszczenie
This paper examines the decision function of the People’s Bank of China concerning setting of the
renminbi exchange rate against the U.S. dollar. We use an ordinal dependent variable model to check
whether main macroeconomic variables and repeated complaints from U.S. institutions and officials
about the Chinese exchange rate had an influence on the Chinese exchange rate policy in the period
2000−2011. The results of estimation show that GDP growth, trade balance and pressure from the U.S.
on greater exchange rate flexibility had a positive impact on the probability of renminbi exchange rate
appreciation. These findings suggest that the primary goal of the exchange rate policy in China is to
support the export sector. This goal, however, is compromised by allowing the renminbi to appreciate
under pressure from the U.S. Treasury. This suggests that in large open economies the exchange rate
policy cannot be pursued regardless of its international ramifications.
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