China, the Renminbi, and Global Imbalances: A Quantitative View
Menzie Chinn (November 20th, 2009) Writes:
President Obama's trip to China has returned to scrutiny the role of China's currency and macroeconomic policies in perpetuating global imbalances. [0] [1] [2]
Figure 1: Log real value of RMB (blue, left axis), and Chinese trade balance in billions USD at annual rates (red, right axis) from Chinese statistical sources, and twelve month trailing moving average (maroon). Source: IMF, International Financial Statistics, ADB, NBER and author's calculations.
Various observers have continued to ascribe a central role to real RMB appreciation to effect global rebalancing. I think it's useful to remember that, given a Chinese trade balance in excess of 260 billion USD, appreciation can only have a certain impact. From Cheung, Chinn and Fujii (forthcoming):
...using a single equation error correction model, allowing for coefficient shifts with Chinese accession to WTO, leads to a statistically insignificant estimate of the price elasticity. In
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Figure 1: Real GDP in billions Ch.2005$, SAAR (blue bars), Macroeconomic Advisers 10/17 release (green), and e-forecasting 11/19 release (red). NBER defined recession dates shaded gray, assuming end occurs at 2009M06. Source: BEA 2009Q3 advance release, ... 


