How successful is chinas currency manipulation

Free Slides from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ How Successful is China’s Currency Manipulation? Post prepared October 15 , 2010 Terms of Use: These slides are made available under Creative Commons License Attribution—Share Alike 3.0 . You are free to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like the slides, you may also want to take a look at my textbook, Introduction to Economics , from BVT Publishers.

Is China a Currency Manipulator? ,[object Object],[object Object],[object Object],Post P101015 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ Headquarters of the People’s Bank of China Photo source: Yongxinge, http://commons.wikimedia.org/wiki/File:People%27s_Bank_of_China.jpg

How does China manipulate its exchange rate? ,[object Object],[object Object],[object Object],[object Object],Post P101015 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ Chinese currency c. 1955. The Chinese currency, popularly called the yuan, is known officially as the renminbi . The picture shown here is an old version of the renmenbi. It is technically illegal to provide an image of the current version. Photo source: http://commons.wikimedia.org/wiki/File:RMB2-5jao-A.gif

Why does China manipulate its exchange rate? ,[object Object],[object Object],[object Object],Post P101015 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ Currency exchange machine, Beijing international airport. Photo source: Zhanyanguange, http://commons.wikimedia.org/wiki/File:BJ_%E5%8C%97%E4%BA%AC%E9%A6%96%E9%83%BD%E5%9C%8B%E9%9A%9B%E6%A9%9F%E5%A0%B4_Beijing_Capital_International_Airport_BCIA_FX_Currency_Exchange_self-service_machine_Aug-2010.JPG

Has China changed its currency policy? ,[object Object],[object Object],[object Object],[object Object],Post P101015 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ Notice: Because the vertical axis shows the exchange rate in yuan per dollar, a movement down on this graph indicates an appreciation of the yuan (The purchasing power of the yuan getting stronger relative to dollar)

Is China doing enough? ,[object Object],[object Object],[object Object],Post P101015 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ On a trip to China in October 2010, Sen. Max Baucus (D-MT) Pressed China’s Leaders on undervaluation of the yuan Photo :http://commons.wikimedia.org/wiki/File:Max_Baucus.jpg

Watch the real exchange rate, not the nominal rate! ,[object Object],[object Object],[object Object],Post P101015 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ Let— H = nominal exchange rate in yuan per dollar h = the real exchange rate PUS = US price level PCN = Chinese price level Then h = H (PUS/PCN) This is the simplest of several ways to calculate the real exchange rate. For some other examples, see this post by Menzie Chin on Enconbrowser.com: http://www.econbrowser.com/archives/2010/09/the_yuans_cours_1.html

How fast is China’s real exchange rate changing? ,[object Object],[object Object],[object Object],[object Object],Post P101015 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ China’s inflation rate is faster than that of the United States, and it is rising month by month

Caution—can we be sure China’s policy won’t change again? ,[object Object],[object Object],[object Object],Post P101015 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ ,[object Object],[object Object],[object Object],[object Object]

The Bottom Line: Manipulation Not Completely Successful ,[object Object],[object Object],[object Object],[object Object],Post P101015 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ Photo source: http://commons.wikimedia.org/wiki/File:CE_Made_in_China.jpg

How successful is chinas currency manipulation

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (9)

Similar to How successful is chinas currency manipulation

Similar to How successful is chinas currency manipulation (20)

More from Ed Dolan

More from Ed Dolan (20)

How successful is chinas currency manipulation