Title: Exchange rate movements and aggregate output: the case of China

Authors: Yu Hsing

Addresses: Joseph H. Miller Endowed Professor in Business, Department of Management & Business Administration, College of Business, Southeastern Louisiana University, Hammond, LA 70402, USA

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 1990–2005 and the real stock price and a negative relationship with real depreciation during 2006–2016, the lagged US real interest rate, the real oil price and the expected inflation rate. Therefore, during 1990–2005, 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 2006–2016, the benefits of real appreciation such as lower import costs, lower inflation, and more capital inflows dominated its negative effects such as less exports.

Keywords: currency depreciation or appreciation; deficit spending; stock prices; world interest rates; oil prices.

DOI: 10.1504/IJTGM.2020.106758

International Journal of Trade and Global Markets, 2020 Vol.13 No.2, pp.135 - 143

Received: 22 Jun 2018
Accepted: 11 Feb 2019
Published online: 20 Apr 2020 *

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