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China's Exchange Rate Impasse and the Weak U.S. Dollar

28 Pages Posted: 9 Sep 2008  

Ronald McKinnon

Stanford University, School of Humanities & Sciences, Department of Economics (Deceased); CESifo (Center for Economic Studies and Ifo Institute for Economic Research) (Deceased)

Gunther Schnabl

University of Leipzig - Institute for Economic Policy

Date Written: September 2008

Abstract

Since 2004, China has been backed into a situation where the renminbi is expected to go ever higher against the dollar, and this one-way bet has led to a loss of domestic monetary control. Combined with a more general flight from the U.S. dollar, the resulting monetary explosion in China contributes to the worldwide increase in primary commodity prices - with excess liquidity reminiscent of the global inflation generated by the weak dollar in the 1970s.

Keywords: inflation, exchange rates, macro policies, current account imbalances

JEL Classification: E31, E61, F31

Suggested Citation

McKinnon, Ronald and Schnabl, Gunther, China's Exchange Rate Impasse and the Weak U.S. Dollar (September 2008). CESifo Working Paper Series No. 2386. Available at SSRN: https://ssrn.com/abstract=1264942

Ronald McKinnon

Stanford University, School of Humanities & Sciences, Department of Economics (Deceased)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) (Deceased)

Gunther Schnabl (Contact Author)

University of Leipzig - Institute for Economic Policy ( email )

Institute for Economic Policy
Grimmaische Straße 12
Leipzig, 04109
Germany

HOME PAGE: http://www.wifa.uni-leipzig.de/iwp/

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