Macro and its imbalances
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Back in the 1970s and ‘80s, a sure vote-getter in the US and pleasure-getter on Capitol Hill was to complain about Japan’s manipulating its exchange rate.
Is an undervalued renmimbi the source of global imbalances? | vox - Research-based policy analysis and commentary from leading economists
Global imbalances are at the heart of rising political tensions in the international economic sphere ( Claessens et al. 2010 ). For some observers, the sight of the advanced economies suffering from a dearth of aggregate demand while the world’s exporters enjoy large trade surpluses seems the result of beggar-thy-neighbour policies. 1 China’s trade surplus is again growing steadily, most notably with the US, while the renminbi is still being held down by official policy. The US lower house has recently passed a protectionist bill aimed at forcing China to change its ways.
Is Germany the new China? A sceptical view | vox - Research-based policy analysis and commentary from leading economists
The legislation passed by the US House of Representatives last week threatening tariffs against Chinese goods is the latest salvo in the Sino-US currency dispute ( Evenett 2010 , Sanger and Chan 2010).
The effect of a renminbi appreciation on the US-China trade balance | vox - Research-based policy analysis and commentary from leading economists
Is China's currency undervalued? | vox - Research-based policy analysis and commentary from leading economists
Most economists agree that allowing global current account imbalances, notably the US deficit and the Chinese surplus, and their accompanying capital flows to accumulate contributed to the over-leveraging and under-pricing of risk that triggered the crisis. This was recognised at the Pittsburgh Summit in September 2009 where the G20 leaders announced the creation of a new framework to coordinate and monitor national economic policies in order to reduce global imbalances and prevent them from building up in the future. Finding the right exit door from excessive global imbalances – and defining the appropriate policy responses – will require clear understanding of their causes.
There has been a lot of excited press commentary recently about China’s overtaking Japan as the world’s second largest economy. China’s GDP should be larger than Japan’s for the first time sometime this year, which in a similar context in 1987 the Italians called “il sorpasso”. For all the excited search for the deeper meaning of this event, however, I would argue that if we examine the change in relative position from the point of view of not just what happened to Chinese GDP in the past twenty years, but also what happened to Japanese GDP, there may be less cause for celebration than we might think.
Mike Pettis: Chinese Consumption and the Japanese Sorpasso
Alphaville » Real appreciation
This sharp bit of analysis by Ed Dolan on renminbi appreciation has been getting passed around the blogosphere lately (our emphasis): Heated rhetoric aside, the real question is, how successful has the manipulation been in maintaining the competitiveness of Chinese exports? To answer that question, we need to look not just at nominal exchange rates, but at real rates.Alphaville » Bursting bubbles
While you mull that over, like any historian worth their salt he’s asking some hard questions — specifically about a certain “emerging market narrative” du jour. Cut to China c.2010 (click to enlarge):
Monetary Base And Short Term Debt (Ultra-wonkish) - NYTimes.com
Some people have quarreled with my statement of this equivalence. It’s true, they say, that monetary base and Treasury bills both yield near-zero interest rates. But monetary base is money — it provides liquidity in a way that T-bills, no matter how negotiable, don’t.
Macroeconomic Imbalances
The Yuan Dispute
Global Macroeconomic Framework