The RMB Debate: Empirical Analysis on the Effects of Exchange Rate Shocks in China and Japan

19 Pages Posted: 5 Oct 2016

See all articles by Soyoung Kim

Soyoung Kim

Seoul National University

Yoonbai Kim

University of Kentucky - Department of Economics

Date Written: October 2016

Abstract

For a better understanding of the ongoing debates on the RMB, this paper investigates the effects of exchange rate shocks on output and the current account for China and Japan. We use structural vector auto‐regression models and find that yen appreciation reduces current account surpluses while having no strong effect on output in Japan. RMB appreciation, on the other hand, has an insignificant effect on the current account, although it tends to reduce output in China. For China, dollar pricing with vertical trade integration seems responsible for the insignificant effect on the current account.

Suggested Citation

Kim, Soyoung and Kim, Yoonbai, The RMB Debate: Empirical Analysis on the Effects of Exchange Rate Shocks in China and Japan (October 2016). The World Economy, Vol. 39, Issue 10, pp. 1539-1557, 2016, Available at SSRN: https://ssrn.com/abstract=2847999 or http://dx.doi.org/10.1111/twec.12417

Soyoung Kim (Contact Author)

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)
+82-2-880- 2689 (Phone)

Yoonbai Kim

University of Kentucky - Department of Economics ( email )

Lexington, KY 40506
United States

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