Exchange rate movements and aggregate output: the case of China Online publication date: Mon, 20-Apr-2020
by Yu Hsing
International Journal of Trade and Global Markets (IJTGM), Vol. 13, No. 2, 2020
Abstract: Applying an extended IS-MP-AS model (Romer, 2000), this paper finds that real GDP in China has a positive relationship with real depreciation during 19902005 and the real stock price and a negative relationship with real depreciation during 20062016, the lagged US real interest rate, the real oil price and the expected inflation rate. Therefore, during 19902005, the benefits of real depreciation such as more exports overwhelmed the costs of real depreciation such as higher import costs, higher inflation and less capital inflows whereas during 20062016, the benefits of real appreciation such as lower import costs, lower inflation, and more capital inflows dominated its negative effects such as less exports.
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