The Dynamics of Real Interest Rates, Real Exchange Rates and the Balance of Payments in China: 1980-2002
April 1, 2003
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Summary
Based on China's experience between 1980 and 2002, a cointegrated vector autoregression model was established to explore the relationships among real interest rates, real exchange rates and balance of payments in China. Taking into account institutional changes, the empirical study shows that significant and usually non-monotonic interactions exist between these three variables. The paper discusses theoretical and policy implications of the empirical result.
Subject: Central banks, Exchange rate arrangements, Exchange rates, Financial services, Foreign exchange, International reserves, Real effective exchange rates, Real exchange rates, Real interest rates
Keywords: China, discussed exchange rate policy, equilibrium exchange rate, Exchange rate arrangements, exchange rate system, Exchange Rates, Interest Rates, International reserves, managed float, misalignment in China, nominal exchange rate, Real exchange rates, real interest rate differential, Real interest rates, single-equation approach, swap market, WP
Pages:
28
Volume:
2003
DOI:
Issue:
067
Series:
Working Paper No. 2003/067
Stock No:
WPIEA0672003
ISBN:
9781451848922
ISSN:
1018-5941
