Currency Intervention and Consumer Welfare in an Open Economy

This paper investigates whether China can benefit from a trade surplus (deficit) in one period and use it to pay off the debt in the next period by manipulating the exchange rates. If marginal utility of income is nonincreasing in the exchange rate, then the optimal exchange rates are the equilibrium rates that yields trade balance each period. Numerical examples using the Cobb-Douglas and CES utility functions illustrate the main proposition.

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Year of publication:	2014-03-07
Authors:	Jin, Hailong ; Choi, E Kwan
Institutions:	Department of Economics, Iowa State University
Subject:	currency interventioni \| consumer welfare

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Series:	Staff General Research Papers.
Type of publication:	Book / Working Paper
Notes:	Forthcoming in International Review of Economics and Finance
Classification:	F1 - Trade
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010750255