How China's Holdings of Foreign Reserves Affect the Value of the US Dollar in Europe and Asia
By January 2009, China held almost US$2tn in foreign reserves. The present paper estimates the marginal effect of China changing its holdings of foreign reserves on the value of the US dollar in Europe and Asia. Because using traditional techniques to find this estimate would be inappropriate due to severe problems resulting from omitted variables, the present paper uses a new approach, bidirectional-reiterative truncated projected least squares, that has been proven to minimize problems associated with omitted variables. It is found that if China would sell 1 percent of its foreign reserves, then the value of the US dollar would fall by 0.44 percent. With such a large effect, China has an incentive to either not sell any of its US dollar reserves or sell all of its US dollar reserves. Copyright (c) 2010 The Author Journal compilation (c) 2010 Institute of World Economics and Politics, Chinese Academy of Social Sciences.
Year of publication: |
2010
|
---|---|
Authors: | Leightner, Jonathan E. |
Published in: |
China & World Economy. - Institute of World Economics and Politics. - Vol. 18.2010, 3, p. 24-39
|
Publisher: |
Institute of World Economics and Politics |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Estimates of the Inflation versus Unemployment Tradeoff that are not Model Dependent
Leightner, Jonathan E., (2020)
-
The changing effectiveness of monetary policy
Leightner, Jonathan E., (2013)
-
Covid-19, out-of-pocket medical expenses and consumption
Leightner, Jonathan E., (2021)
- More ...