Search

Research background: Most transactions in world trade are invoiced in several international currencies. The changes in the distribution of the great economic powers and the strengthening of the position of developing countries make it necessary to consider the factors determining the choice of trade invoicing currency and to assess the prospects of the dollar as an invoicing currency and the possibility of strengthening the position of developing countries' currencies in this function. Purpose of the article: The aim of the paper is to assess the factors influencing the choice of invoicing currency for international trade in 2000-2019. Methods: The analysis of factors influencing the choice of international trade invoicing currency is based on panel data modelling. The study is conducted for a group of 55 countries. It is assumed that the following variables may influence the currency position in the trade invoicing function: the share of the issuer's country in the bilateral trade, inflation and exchange rate. Findings & value added: The analysis showed that despite the decreasing share of the United States in world trade, the U.S. dollar remains the most important export invoicing currency. The main factors influencing the dollar's dominance are the U.S. share of countries' exports, inflation in developing countries, and the exchange rate in advanced economies. The great significance of trade share as a determinant of the position of the trade invoicing currency is an important indication of the strengthening position of developing country currencies, particularly the Chinese yuan. The obtained results confirm, with the use of more complete data, the validity of the dominant currency paradigm and enrich the still underdeveloped analysis in the area of international macroeconomics using panel data analysis. [ABSTRACT FROM AUTHOR]

This paper investigates the efficacy of currency management as a policy tool to improve trade balance by analyzing the impact of the real exchange rate on the bilateral trade between the United States and China. The paper builds upon the existing literature and empirical analysis is carried out based on the J-curve hypothesis using quarterly data from 2000Q1 to 2021Q4. The vector-auto regression (VAR) model is estimated using China and the United States' trade balance, real exchange rate, and GDP. The impulse response functions provide evidence of the J-curve. A shock in Yuan (CNY)-US dollar real exchange rate leads to initial deterioration but improvement in the trade balance in favor of China over subsequent quarters. The results hold for various sub-periods of analysis, i.e., after the exchange rate was allowed to fluctuate since July 2005. Evidence supports that the policy of managing the real exchange rate might have yielded desired results for China. [ABSTRACT FROM AUTHOR]

This paper analyzes the potential spillovers of a slowdown in Chinese growth to the United States and the rest of the world. Through a combination of structural VAR and DSGE analyses, we find that (1) spillovers from China to the rest of the world have grown significantly in the past decade; (2) the negative growth spillovers to the United States are more modest than to emerging market economies—particularly for commodity exporters—or other advanced economies, primarily because the latter group has larger direct exposure in trade to China; and (3) although the United States has limited direct financial exposure to China, the negative spillovers to the U.S. economy are amplified significantly if the negative Chinese growth shock leads to adverse global risk sentiment and monetary policy in the United States is constrained in its reaction. [ABSTRACT FROM AUTHOR]

This paper investigates the impact of real exchange rate volatility and misalignment on exports and imports between China and the United States. Our empirical analysis used the quarterly time series data over the 1994Q:1–2019Q:4 period. We used the ARDL-bound testing approach for the short- and long-run relationship. The empirical results reveal that China's real exchange rate volatility and misalignment significantly impact China's real exports and imports over the sample period. In the short-run, the relationship between real exchange rate misalignments and China's exports is positive, whereas negative with imports from the United States. In the long run, the real exchange rate misalignment positively affects exports and negatively affects imports. The evidence suggests that both higher real exchange rate volatility and misalignment directly affect the relative price of goods and encourage China exports to United States. [ABSTRACT FROM AUTHOR]

Copyright of International Economics / Economia Internazionale is the property of Camera di Commercio di Genova and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The article offers an analysis of the domestic politics surrounding the internationalization of the Chinese currency, the renminbi (RMB). It describes the primary role played by the People's Bank of China (PBC) in the internationalization of RMB. The impact of the global financial crisis of 2008-2009 and the U.S. monetary policy on the currency is discussed, as well as the buildup of foreign exchange reserves due to the Chinese central bank's foreign exchange market interventions. Also explored is the effort by the PBC to reinforce its monetary policy effectiveness.

Copyright of Industry / Industrija is the property of Economics Institute and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This article examines the potential for and geopolitical implications of the renminbi (RMB) emerging as an Asian key currency. Most analysts assume that for the RMB to become a dominant international currency, China must implement full-scale financial liberalization. However, this might not hold true in Asia, even if it does on the global level. China could enhance the RMB's role as a store of value and reduce the RMB's weakness in liquidity. Additionally, if three conditions are met almost contemporaneously, the RMB is very likely to become a regional key currency (RKC) in Asia—even without full-scale liberalization—within the next ten to twenty years. These conditions are: moderate diplomacy by China, continuing economic growth in China and new economic distress in the United States. The potential that these conditions can all be met is not necessarily low. If the RMB did become an RKC in Asia, it would have significant geopolitical implications. It would limit the US' use of seigniorage and US bonds to sustain its military deployment capabilities, it would weaken the US' ability to apply financial sanctions and it would increase China's ability to use economics strategically. These changes would undermine US prestige and increase China's political influence, destabilizing Asian security. [ABSTRACT FROM AUTHOR]

In the last few decades, and especially since the financial crisis of 2007–2008, uncertainty about the future of the US dollar has been mounting. A broad-based theoretical debate on the decline of the dollar and its consequences has begun. There is a large body of studies that sees the origin of an international money as a market-led process. In this view, because the United States will very soon lose its economic pre-eminence the US dollar will consequently share its international role with other currencies or even be replaced by the renminbi. In this paper we contest this argument, focusing on the conditions that make a fiat money acceptable in international transactions. Trust in a type of money like this needs an institutional framework that guarantees the property rights of currency holders. This framework implies a high level of rule of law domestically and a high level of state capability in the international balance of power. Since at present no other currency fulfils these two requirements at the same time, the dominance of the US dollar as an international money is going to last. [ABSTRACT FROM AUTHOR]

Since the collapse of the Bretton Woods monetary order in 1971, the US dollar has successfully maintained its global hegemony despite the US's declining share in the global economy, thanks largely to the US's political-military supremacy. The recent rise of China poses a serious dilemma to the US. On the one hand, China's export-oriented development has provided the US with low-cost manufactured imports and cheap credit. On the other hand, the US's expanding current account deficit, largely attributable to China, has precipitated a crisis of confidence over the dollar's long-term viability. This dilemma explains the US's vacillation in its currency conflict with China over the last decade. China has also been caught in a dilemma. While keeping its currency cheap could help sustain its export competitiveness, it would deepen China's dependence on the US market and Treasury bonds as an outlet for its expanding current account surplus. On the other hand, while a RMB revaluation would facilitate China's long overdue economic rebalancing and reduce its dependence on the US, the resulting unravelling of the long-entrenched export-oriented growth could generate large-scale economic dislocation. No matter how this currency conflict is settled, its final resolution will determine the future of the dollar's global hegemony. [ABSTRACT FROM AUTHOR]

The article discusses the decreasing global value of the U.S. dollar as of 2013 and its potential impact on the United States' international political power. The author begins by explaining the impact of the 2007-08 global financial crisis on the liberal U.S. financial system, and goes on to examine a change in the international balance of power that favors China, as evidenced by its economic development and import growth. Other topics addressed include the International Monetary Fund (IMF), the internationalization of the Chinese Yuan currency, and the decline of the U.S. liberal capitalist culture.

The relation between China's RMB exchange rate and US real economy has recently become a hotly debated issue among scholars, researchers, and policymakers. Using monthly data from Nov. 2001-Nov. 2010, this paper employs the cointegration test and VECM model to capture the relationships among the Chinese RMB exchange rate, US-China bilateral trade, and the US unemployment rate. Results indicate that the US unemployment rate is negatively correlated with the RMB exchange rate. Impulse response analysis discloses the transmission mechanism of RMB appreciation: an appreciation of the RMB leads to a drop in US-China bilateral trade, which associates with a slight rise in the US unemployment rate. A potential explanation for these unconventional results lie in the complementary industrial structures between the two countries. Some policy suggestions are made at the end. [ABSTRACT FROM AUTHOR]

In 2005, China abated its fixed exchange rate against the U.S. dollar and began to appreciate the Renminbi (RMB). In this paper, I explore the effect of the appreciation of the RMB on imports to the United States from China by augmenting the gravity model with the exchange rate. Using an industrial panel data set during the period 2002-2008 and controlling for the endogeneity of the bilateral exchange rate, this extensive empirical analysis suggests that the appreciation of the RMB against the U.S. dollar significantly reduced imports to the United States from China. This finding is robust to a variety of econometric methods and to coverage in different periods. [ABSTRACT FROM AUTHOR]

By taking into account balance of payments and demand for foreign exchange reserves, this article constructs a theoretical model to analyze the effects of RMB exchange rate volatility on the fluctuation of foreign exchange reserves. And then this article also investigates the effects of the nominal effective exchange rate volatility and real effective exchange rate volatility on the foreign exchange reserve. The results of theoretical model show that the effects of scale variable, propensity to import, foreign income and exchange rate on foreign exchange reserves depend on the their effects on n, the certain part of instant changes of foreign exchange reserves respectively. The empirical results show that, in the long run, scale variable, propensity to import, nominal effective exchange rate and real effective exchange rate have significantly positive effects on foreign exchange reserves while the effects of reserve volatility, real effective exchange rate volatility and exchange rate regime are significantly negative. The effects of foreign income, real interest rate difference between China and the US and nominal effective exchange rate volatility are not significant. In the short run, nominal effective exchange rate volatility and real effective exchange rate have significantly negative effects on the change of foreign exchange reserves, and the effect of foreign income is significantly positive while the effects of other variables are not significant. [ABSTRACT FROM AUTHOR]

During the recent years, the Renminbi (RMB) exchange rate issue has been at the centre of ongoing debate over the source of global current account imbalance, especially with the United States. The objective of this study is to contribute to the current discussion by providing some new evidence on China's exchange rate policy and the impacts of RMB devaluation/revaluation on China's trade balance using a structural vector autoregression (VAR) approach. The results indicate that the dynamic effect of exchange rate on China's trade balance is still very limited and China's balance of trade is mainly determined by the world demand and its trade performance, with the latter being a result of its successfully maintained comparative advantage. [ABSTRACT FROM AUTHOR]

In deciding whether to support an international role of their country's currency, national policymakers are often influenced by lobbying from domestic sectoral groups. While these groups will be consistently more interested in some implications of international currency issuance than others, their specific preferences are likely to be highly context specific. Looking at the cases of the United States and China, we anticipate that domestic sectoral lobbying is unlikely to pressure either the US government to defend the dollar's international role vigorously or the Chinese government to internationalize the renminbi fully. From this domestic sectoral perspective, the future looks to be characterized by reluctant monetary leaders rather than increasingly aggressive currency competition between the United States and China. [ABSTRACT FROM AUTHOR]

The purpose of this study is to analyze the impact of Chinese renminbi exchange rate againts the United States (US) dollar, on the bilateral export of Indonesia to the US. Johansen cointegration test and Ordinary Least Square (OLS) regression are employed to examine one impact. This research is limited only in the long-run aspect. The Johansen test shows that there are long-run relationships amongs variables involved such as GDP, Real Exchange Rate (RER), RER Volatility, and dummy variables. Empirical test result shows that there are positive significant impacts of the Chinese renminbi on the Indonesia's exports to the US, implying that the relationship between Chinese exports and Indonesia export are complementary in the US market. [ABSTRACT FROM AUTHOR]

The present paper investigates the effect of China's share of US imports on the aggregate-level exchange rate pass-through to US import prices over the period from January 1999 to December 2008. The paper also focuses on the post-reform period, after 2005, allowing greater flexibility of the RMB to explore the change in the role of the Chinese import share in determining the trend in the US exchange rate pass-through. Evidence reveals that China's share of US imports has a negative effect on the exchange rate pass-through. However, this negative effect has been moderated to a negligible level since China's exchange rate reform. An important implication is that the exchange rate flexibility of the RMB has been raised to a significant level may no longer cause distortion in the US competitive environment and prevent the USA from adjusting current accounts. [ABSTRACT FROM AUTHOR]

The article discusses the impact of an economic rise in China on the trade relations between the U.S. and Canada. Economic conditions in China such as poverty, the increase in manufacturing, and a rapid rise in economic development are discussed. Other topics discussed include the transformation of global trade and manufacturing, the contribution of the U.S. and Canada to the rise of China in international trade, and exchange rates and the yuan in China. Recommendations for U.S. and Canadian relations related to international trade in China are offered which include pressure on the Chinese government and continued investments in China.

The article offers the author's analysis on how to minimize financial risk in one's energy trade portfolio amidst the difficult situation in the energy market in the U.S. It asserts that those U.S. energy market participants who are planning to hedge their portfolios must venture to foreign nations, particularly China which is considered as the world's fastest-growing major economy. It also suggests that assets could be purchased in yuan to reduce or eliminate currency risk.

Since the recent economic crisis, the undervaluation of China's exchange rate has been a focus in the debate on the global policy mix. Using a non-competitive input-output table, we establish a comparative-static general equilibrium model to simulate the impact of real exchange rate changes on Sino-US trade and labor markets. The simulation shows that the impacts of a 10-percent RMB revaluation on the trade surplus of China and the labor market of the USA are more modest than is generally perceived, and the negative impact on the output of the non-processing industry in China is more significant than that on the processing industry. The Sino-US trade imbalance will continue to deteriorate, China's non-processing trade surplus will decline and the processing trade will increase, with the combined effect being small. For the USA, labor-intensive goods imported from China will shift to different Asian countries instead of transferring back to the US market. The simulation results indicate that the impacts of an RMB revaluation on both Chinese and US labor markets would be limited. [ABSTRACT FROM AUTHOR]

Using simulations projecting Chinese economic growth into the future, this paper first examines when China will overtake the USA to become the largest economy. Demographic changes that affect economic growth are taken into consideration in these projections. China is expected to become number one sometime in the mid-2020s, unless its growth rate of gross domestic product per worker declines dramatically, à la the lost decade of Japan. Next, the paper examines whether China becoming the number one economy will mean its currency, the renminbi (RMB), will become the international key currency. According to the basket currency regressions during the period that Chinese currency was gradually appreciating against the US dollar from July 2005 to August 2008, it is shown that the RMB has already acquired a strong influence on the Asian currencies. This shows that the RMB is fast gaining the status of a regional anchor currency for a possible regional joint float. As the Chinese government proceeds with internationalization of its currency, the RMB is expected to gain in the ranking of other aspects of international currency, such as the store of value and the medium of exchange. [ABSTRACT FROM AUTHOR]

Many scholars believe with the United States' increasing debt, the global position of the dollar is weakening. As the dollar declines, China, now the largest holder of U.S. dollars in the world, is understandably concerned. China's controversial peg to the U.S. dollar, combined with its $2.4 trillion in foreign reserves and trade imbalances, is debated daily by politicians and economists. This article presents arguments for and against the current China monetary policy in economic and political contexts. Statements from China's leaders, other global leaders, and economists are reviewed. Economic and political obstacles and incentives in the context of their influence on the China government are considered. Finally, milestones for business leaders to look for are suggested to help determine China's possible path to a fully convertible yuan. © 2010 Wiley Periodicals, Inc. [ABSTRACT FROM AUTHOR]

This article is stimulated by current criticisms of Chinese exchange rate policy. The concern is really about China's current account surplus. The article discusses the factors that determine the surplus, and the reasons why the surplus increased sharply from 2005. The international implications of China's surplus and growth are discussed, and how it has affected the world real interest rate, and through that the US current account deficit. The surplus has had various international relative price effects, which have produced both gainers and losers. Finally, the surplus played only a small part in determining the world credit crisis. [ABSTRACT FROM AUTHOR]

The volatility of RMB exchange rate is always the focus of academic discussion. This paper selected 826 high-frequency exchange rate data after the rate system reform, based on the calculation of U.S. dollars and HK on RMB exchange rate fluctuations by GARCH (1, 1) model, and studied the interaction among U.S. dollar, Hong Kong dollar, Japanese yen and euro on RMB exchange rate. Accordingly, it is suggested that the volatility in the continuity of HK on RMB exchange rate is stronger than U.S. dollar on RMB exchange rate, in the foreign exchange market in China, U.S. dollar and HK are the strongest, euro followed, and yen is the weakest. [ABSTRACT FROM AUTHOR]

On 21 July 2005 China adopted an undisclosed basket exchange rate regime. We formally assess and envisage the gradual evolution of the renminbi over time. We utilise nonlinear dependencies in the renminbi exchange rate and describe the smooth transition of the renminbi/US dollar (RMB/USD) exchange rate using the family of time-varying autoregressive (TV-AR) models. The results indicate that the forward-looking nonlinear model adequately depicts the gradual reform process underlying the new RMB exchange rate regime. [ABSTRACT FROM AUTHOR]

The future of the dollar depends partly on China and the US being able to effectively manage the tensions arising from the large bilateral trade imbalance and the build-up of foreign exchange reserves by China. We argue that these tensions are unlikely to change over the medium term. While tensions can be managed, the possibilities for miscalculations and policy errors are significant given the complex, and sometimes inconsistent, interests of both countries' policy-makers. In fact, China faces its own form of a 'trilemma' and the ability of the US to exercise its monetary power by shifting the burden of adjustment onto China is uncertain. Given this, and volatile international financial markets, miscalculations which might result in a collapse in the value of the dollar affecting its role as an international currency become a real possibility. [ABSTRACT FROM AUTHOR]

The present article is a reply to the article by John A. Tatom titled "The US-China Currency Dispute: Is a Rise in the Yuan Necessary, Inevitable or Desirable?," recently published in this journal. We found that John Tatom seems to only give a partial description of the US-Chinese economic relations, of the main features of the Chinese economy, and also of the macroeconomic policy options available to China. We argue that the real exchange rate is not the appropriate measure for a currency undervaluation, but it is the continuous, one-directional and accelerating accumulation of foreign exchange reserves. We also argue that the likely improvement in the US trade balance deficit caused by an appreciating Yuan will not be offset by growing US trade balance deficits with other East Asian countries. Furthermore, giving up the actual currency peg will benefit rather than harm China, provided that the steps towards Yuan flexibility will be taken in the right sequence and order. We hold that a revaluation of the Yuan is necessary, inevitable and desirable just as much as it happened to be with the Deutschmark in 1969. It would not "damage Chinese development." China needs a Yuan appreciation mainly in its own interest to assure domestic financial market stability, and to avoid an overheating of its economy and a soaring inflation. [ABSTRACT FROM AUTHOR]

China-bashing has become a popular US media and political sport. This is largely due to the US trade imbalance and the belief, by some, that China is responsible for it because it manipulates its currency to hold down the dollar prices of its goods, unfairly creating a trade advantage that has contributed to the loss of US businesses and jobs. This paper reviews the problem of the large trade imbalance that the United States has with China and its relationship to Chinese exchange rate policy. It examines the link between a Chinese renminbi appreciation and the trade balance and also whether a generalized dollar decline could solve the global or Chinese US trade imbalance. The consensus view explained here is that a renminbi appreciation is not likely to fix either the trade imbalance with China or overall. If these perceived benefits of a managed float are small or non-existent, then perhaps they should be pursued anyway because of small costs or even benefits for China. Section IV looks at the costs of a managed float in terms of the benefits of the earlier peg. Opponents of a fixed dollar/yuan exchange rate ignore the costs of a managed float for China, especially with limits on currency convertibility. These costs are outlined here in order to provide an economic basis for the earlier fixed rate and China's reluctance to appreciate. Finally it is suggested that the necessary convertibility on capital account, toward which China is moving, could easily result in yuan depreciation under a floating rate regime. This is hardly the end that China critics have in mind and it is not one that would improve US or other trade imbalances with China. [ABSTRACT FROM AUTHOR]

Since 2003 China has faced increasing pressure, especially from the US and Japan, to revalue the renminbi. In July 2005 China responded by announcing a small revaluation and a switch from a dollar peg to a tightly managed float against a currency basket. The mainstream economic debate, which we briefly review, has focused on whether, and to what extent, the renminbi is undervalued. From a political economy perspective, however, the more interesting question is why China has been so reluctant to significantly revalue the renminbi especially since it was keen to prove itself a ‘responsible member of the international community’ by not devaluing in the wake of the Asian financial crisis in 1997–1998. We argue that this can be explained by three factors. These are, firstly, the diminished ability of China's policy-makers to use the export tax rebate policy to mitigate the effects of a revaluation. Secondly, there are differences in the regional context between the two time periods. Thirdly, in the international game of ‘problem assignment’, China refuses to accept that the US trade deficit is its ‘problem’. [ABSTRACT FROM AUTHOR]

Comments on a paper by Barry Eichengreen that discusses issues concerning the exchange rate in China. Issues concerning the rate flexibility in China favored by the International Monetary Fund; Comparison between the U.S. dollar and renminbi; Interest rates between the U.S. and China; Views on the appreciation of yuan.