"Currency Manipulation" and World Trade

Resource Information

The work "Currency Manipulation" and World Trade represents a distinct intellectual or artistic creation found in Bates College. This resource is a combination of several types including: Work, Language Material, Books.

Label

"Currency Manipulation" and World Trade

Statement of responsibility

Robert W. Staiger, Alan O. Sykes

Creator

• Staiger, Robert W

Contributor

• Sykes, Alan O
• National Bureau of Economic Research

Subject

• F13 - Trade Policy; International Trade Organizations
• F31 - Foreign Exchange
• K33 - International Law
• F02 - International Economic Order

Language

eng

Summary

• Central bank intervention in foreign exchange markets may, under some conditions, stimulate exports and retard imports. In the past few years, this issue has moved to center stage because of the foreign exchange policies of China. China has regularly intervened to prevent the RMB from appreciating relative to other currencies, and over the same period has developed large global and bilateral trade surpluses. Numerous public officials and commentators argue that China has engaged in impermissible "currency manipulation," and various proposals for stiff action against China have been advanced
• This paper clarifies the theoretical relationship between exchange rate policy and international trade, and addresses the question of what content can be given to the concept of "currency manipulation" as a measure that may impair the commitments made in trade agreements. Our conclusions are at odds with much of what is currently being said by proponents of counter-measures against China. For example, it is often asserted that China's currency policies have real effects that are equivalent to an export subsidy. In fact, however, if prices are flexible the effect of exchange rate intervention parallels that of a uniform import tariff and export subsidy, which will have no real effect on trade, an implication of Lerner's symmetry theorem. With sticky prices, the real effects of exchange rate intervention and the translation of that intervention into trade-policy equivalents depend critically on how traded goods and services are priced. The real effects of China's policies are potentially quite complex, are not readily translated into trade-policy equivalents, and are dependent on the time frame over which they are evaluated (because prices are less "sticky" over a longer time frame)

Member of

• Working Paper Series (National Bureau of Economic Research), no. w14600

Index

no index present

Literary form

non fiction

Nature of contents

dictionaries

Series statement

NBER working paper series

Series volume

no. w14600

Target audience

specialized