Monetary Management of Transition in China: Balancing Short‐run Risks and Long‐run Optimality
نویسندگان
چکیده
Indeed, a nominal appreciation may help reduce reserve inflows and allow for a more autonomous monetary policy in the case of overheating. A plausible strategy would be a small one-step revaluation, which would bring the renminbi to parity with the Hong Kong dollar. However, such an adjustment may provoke additional speculative capital inflows and is not even necessary to bring about the real appreciation. Overheating should lead to an increase in domestic inflation rates above the U.S. level, which—given the fixed nominal exchange rate—delivers the real appreciation.
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