nep-cna New Economics Papers
on China
Issue of 2006‒12‒04
three papers chosen by
Zheng Fang
Ohio State University

  1. Structural Effects of a Real Exchange Rate Revaluation in China: A CGE Assessment By Willenbockel, Dirk
  2. The impact of trade with China and India on Argentina’s manufacturing employment By Castro, Lucio; Olarreaga, Marcelo; Saslavsky, Daniel
  3. An Empirical Investigation around the Finance-Growth Puzzle in China with a particular focus on causality and efficiency considerations By Maswana, Jean-Claude

  1. By: Willenbockel, Dirk
    Abstract: The misalignment of the Chinese currency exposed by the rapid build-up of China’s foreign exchange reserves over the past few years has been the subject of considerable recent debate. Recent econometric studies suggest a Renminbi undervaluation on the order of 10 to 30%. The modest revaluation of July 2005 is widely perceived as insufficient to correct China’s balance-of-payments disequilibrium and has not silenced charges that China is engaging in persistent one-sided currency manipulation. Within China there are widespread concerns regarding the adverse employment effects of a major revaluation on labour-intensive export sectors, yet the likely magnitude of these effects remains a controversial issue. The paper aims to shed light on this question by simulating the structural effects of a real exchange rate revaluation that lowers the current account surplus-GDP by 4 percentage-points using a 17-sector computable general equilibrium model of the Chinese economy.
    Keywords: Renminbi undervaluation; real exchange rate misalignment; applied general equilibrium analysis
    JEL: F40 F17 C68
    Date: 2006–04
  2. By: Castro, Lucio; Olarreaga, Marcelo; Saslavsky, Daniel
    Abstract: For many in Latin America, the increasing participation of China and India in international markets is seen as a looming shadow of two ‘mighty giants’ on the region’s manufacturing sector. Are they really mighty giants when it comes to their impact on manufacturing employment? This paper attempts to answer this question estimating the effects of trade with China and India on Argentina’s industrial employment. We use a dynamic econometric model and industry level data to estimate the effects of trade with China and India on the level of employment in Argentina’s manufacturing sector. Results suggest that trade with China and India only had a small negative effect on industrial employment, even in a period of swift trade liberalization like the nineties.
    Keywords: China; Latin America; Trade; Import Competition; Trade and Labor Market Interactions; Employment
    JEL: F17 F14 F16 L60 F15
    Date: 2006–10–20
  3. By: Maswana, Jean-Claude
    Abstract: The paper explores a coherent perspective for understanding the multifaceted puzzle of China’s financial development. Specifically, it tests competing finance-growth nexus hypotheses using Granger causality tests in a VECM framework for China over the period 1980–2002. The empirical results support a complex set of bidirectional causality between the financial development proxies and economic growth variable. Additionally, bidirectional causality shows the Chinese financial system to be more driven by and closely aligned with real sector activities than exposed to speculative finance. Study findings have several policy implications. Notably, the development of financial institutions should not be emphasized unilaterally. Rather, attention should be given to the complementary and coordinated development of financial reforms and changes in other areas.
    Keywords: Financial development; economic growth; China; Granger causality
    JEL: O16
    Date: 2006–01–27

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