nep-opm New Economics Papers
on Open MacroEconomics
Issue of 2012‒06‒05
three papers chosen by
Martin Berka
Victoria University of Wellington

  1. The macroeconomic impacts of Chinese currency appreciation on China and the rest of world : A global computable general equilibrium analysis By Yang, Jun; Zhang, Wei; Tokgoz, Simla
  2. The RMB Debate: Empirical Analysis on the Effects of Exchange Rate Shocks in China and Japan By Soyoung Kim; Yoonbai Kim
  3. Dynamics of Current Account Deficit: A Lesson from Pakistan By Syed tehseen, jawaid; Raza, Syed Ali

  1. By: Yang, Jun; Zhang, Wei; Tokgoz, Simla
    Abstract: There has been contentious debate surrounding the issue of undervaluation of the Chinese Renminbi. Despite continuous international political pressure to appreciate its currency, the Chinese government has resisted significant changes. A key question underlining the debate is whether a Renminbi appreciation would deliver substantial gains for exports and employment as the United States has argued or a significant slowdown of Chinese economy as feared by the Chinese government, and if so to what extent. This paper analyzes the ex-ante, short-term impacts of the Chinese Renminbi appreciation on the Chinese and world economies using the novel approach of modeling nominal exchange rate adjustment in the Global Trade Analysis Project, a global computable general equilibrium model. Scenario results show that the Chinese economy will be affected negatively, with lower real gross domestic product, lower employment rates, and a decline in the trade surplus. Chinese currency appreciation has a positive impact on the GDP of the major countries and regions, but by a small margin. With a higher Chinese exchange rate, trade balances for other trading partner countries, with the exception of the United States, improve.
    Keywords: Computable general equilibrium model, Exchange rate, Economic impacts, Renminbi appreciation,
    Date: 2012
  2. By: Soyoung Kim (Seoul National University and Hong Kong Institute for Monetary Research); Yoonbai Kim (University of Kentucky)
    Abstract: For a better understanding of the ongoing debates on the RMB, this paper investigates the effects of exchange rate shocks on output and the current account for China and Japan. We use structural vector auto-regression models and find that yen appreciation reduces current account surpluses while having no strong effect on output in Japan. RMB appreciation, on the other hand, has an insignificant effect on the current account, although it tends to reduce output in China. For China, dollar pricing with vertical trade integration seems responsible for the insignificant effect on the current account.
    Keywords: Renminbi Appreciation, Current Account Imbalance, VAR, Exchange Rate Shocks, Recession
    Date: 2012–05
  3. By: Syed tehseen, jawaid; Raza, Syed Ali
    Abstract: This study investigates the determinants of current account deficit in Pakistan by using the annual time series data for the period 1976 to 2010. The cointegration results suggest the positive and significant long run relationship of current account deficit with exchange rate, trade deficit and fiscal deficit, while significant negative relationship is found with external debt and private saving. The error correction model also confirms the significant positive relationship of current account deficit with exchange rate, trade deficit and fiscal deficit in short run. The Granger-causality test shows the bidirectional causality run from exchange rate and external debt to current account deficit. However, unidirectional causality is found from current account deficit to external debt and fiscal deficit. It is recommended that government needs to be cautious in financing its fiscal deficit. Savings habits should be increase to narrow the investment gap in economy.
    Keywords: Current Account; Saving; Fiscal Deficit; Trade Deficit; External Debt; Exchange Rate
    JEL: E62 F32 E21
    Date: 2012–02–10

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