In search of an optimal strategy for yuan’s real revaluation
International commentators seem to have a consensus view that the Chinese yuan is substantially undervalued and the Chinese monetary authority must take speedy actions to redress the currency misalignment by rapid nominal revaluation. This paper argues for a gradualist but comprehensive strategy for adjusting the renminbi’s exchange rate. Taking into consideration the facts that the yuan’s undervaluation is caused by an array of domestic and international factors and that the Chinese central bank cannot effectively invest its growing holdings of foreign reserves, we develop a framework to provide a theoretical underpinning for the optimal strategy for the renminbi’s gradual revaluation. With this strategy, the renminbi undervaluation problem is gradually redressed through a combination of nominal appreciation and higher inflation plus some other structural and macroeconomic policies. This strategy can also allow absorption of external imbalances, hence strengthening the foundation of China’s long-term growth.
Year of publication: |
2013
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Authors: | Dai, Meixing |
Published in: |
Journal of Chinese Economic and Business Studies. - Taylor & Francis Journals, ISSN 1476-5284. - Vol. 11.2013, 1, p. 29-46
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Publisher: |
Taylor & Francis Journals |
Saved in:
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