Critically analyzing China’s monetary policy between 1995 and 2005. Provide any websites, textbooks, etc. if used to obtain information.
Background
With capital controls, think of China as a closed economy; without capital controls, think of China as a small open economy. Remember the relation between net exports and net capital flows. Try to reason as a business person and answer to the best of your abilities.
Briefly research China’s exchange rate regime between 1995 and 2005. (Please note that after 2005, China’s exchange regime has changed, and became more flexible, with an abrupt acceleration in the degree of flexibility in 2015, even though there continues to be debate about its rigidity and fairness to foreign economies, so stay focused on this period that is simpler to analyze.
The currency of china i.e. yuan, doesn’t follow the floating
exchange rate which depends upon the market forces. Till 2005 it
followed fixed rate of exchange. The old foreign exchange regime
has a overvalued exchange system.
In 1995, yuan was converted into current account
In 1998- keep the currency stabilised.
2001- China joined WTO and decided to adjust its currency
regime.
2004-China decided to moved towards flexible currency regime.
2005- china revalued their currency and has shifted to flexible
currency with demand and supply effects of other currencies.
The impossible trinity triangle which means the combination of free
capital flow, fixed exchange range and sovereign monetary policy.
The china tried to implement these and implementation of these
three at the same time may lead to problem in the economy.
The china policy aims at two targets (i) economic target for
stability and (ii) political target for growth.
Critically analyzing China’s monetary policy between 1995 and 2005. Provide any websites, textbooks, etc. if used to obtain information. Background With capital controls, think of China as a closed ec...
Write a 500-word report critically analyzing China’s monetary policy between 1995 and 2005. Background With capital controls, think of China as a closed economy; without capital controls, think of China as a small open economy. Remember the relation between net exports and net capital flows from Chapter 6 of the textbook. Apply the combined insights from Chapters 6, and 10–13 and come up with your best answers to the questions below by using some of the models we developed in...
1. Why do you think that the Chinese historically pegged the value of the yuan to the U.S. dollar? 2. Why did the Chinese move to a managed-float system in 2005? 3. What are the benefits that China might gain by allowing the yuan to float freely against other major currencies such as the U.S. dollar and the euro? What are the risks? What do you think they should do? 4. Is there any evidence that the Chinese kept the...