28 Pages Posted: 9 Sep 2008
Date Written: September 2008
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: 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