The Real Exchange Rate and the Structural Transformation(s) of China and the U.S

From 1989 to 2010, the RMB-dollar real exchange rate depreciated, despite China's rapid income growth relative to the US. We develop a macroeconomic-trade model of the very long-run equilibrium RMB-dollar real exchange rate. We show that this long-run depreciation of the RMB-dollar real exchang...

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Bibliographic Details
Published inInternational economic journal Vol. 27; no. 2; pp. 303 - 319
Main Authors Dekle, Robert, Ungor, Murat
Format Journal Article
LanguageEnglish
Published Abingdon Routledge 01.06.2013
Taylor & Francis Ltd
한국국제경제학회
Subjects
Agriculture
Balassa-Samuelson
Chinese agriculture
Depreciation
Economic models
Equilibrium
equilibrium exchange rates
Foreign exchange rates
Income inequality
Macroeconomics
Productivity
Purchasing power parity
RMB-dollar real exchange rate
Transformation
경제학
United States > US
China
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Summary:From 1989 to 2010, the RMB-dollar real exchange rate depreciated, despite China's rapid income growth relative to the US. We develop a macroeconomic-trade model of the very long-run equilibrium RMB-dollar real exchange rate. We show that this long-run depreciation of the RMB-dollar real exchange rate can be justified by our model, if we note that Chinese agriculture has relatively low productivity and that agriculture is tradeable. Relative to our equilibrium benchmark, the current real RMB-dollar rate is, if anything, over appreciated.
Bibliography:G704-000034.2013.27.2.004
ISSN:1016-8737
1743-517X
DOI:10.1080/10168737.2013.799900