The growing weight of the People’s Republic of China (PRC) in the world economy, measured by gross domestic product (GDP) and trade volume, has intensified debate on the potential international role of its currency—the renminbi (RMB). This paper provides an overview of RMB...

This paper considers how exchange rates affect East Asian trade. The evidence indicates that exports produced within regional production networks depend on exchange rates throughout the region while labor-intensive exports depend on exchange rates in the exporting country. These results make...

This paper examines the impact of sectorial reforms on current account imbalances, with a special focus on the People’s Republic of China (PRC). In particular, we investigate to what extent reforms pertaining to the financial sector, social protection, and healthcare may contribute to a...

This paper examines the statistical nature of the persistency of current account balances and its determinants. With the assumption that stationary current account series ensures the long-run budget constraint while countries may experience “local non-stationarity†in current account...

Enormous trade surpluses are problematic for the Peoples Republic of China (PRC) and the rest of the world. They primarily stem from processing trade. This paper investigates how exchange rate changes would affect the PRCs imports for processing and processed exports. The results indicate that...

This paper examines the international transmission effects that a positive supply shock in emerging economies may have on inflation in developed economies. We construct a dynamic stochastic general equilibrium (DSGE) model for three countries and analyze the impact of a supply shock in an...

We investigate the determinants of currency choice for trade invoicing in a cross-country context while focusing on the link between capital account liberalization and its impact on the use of the renminbi (RMB). We find that while countries with more developed financial markets tend to invoice...

The aftermath of the global financial crisis of 2007–2009 has called the export-led growth model of Asian economies into question. This paper describes the contribution that macroeconomic policy can make to promote a rebalancing of growth away from dependence on exports to...

This paper discusses Japan’s strategy for Asian monetary integration. It argues that Japan faces three major policy challenges when promoting intraregional exchange rate stability. First, there must be some convergence of exchange rate regimes in East Asia, and the most realistic option is for...

Since the 1980s, emerging countries have been urged to welcome foreign capital inflows. The result has often been a pattern of surges, where excessive inflows were followed by damaging “sudden stops†and reversals. This was dramatically evident in the Asian crisis of...