2019-10-09 16:46:00 Wed ET
federal reserve monetary policy treasury dollar employment inflation interest rate exchange rate macrofinance recession systemic risk economic growth central bank fomc greenback forward guidance euro capital global financial cycle credit cycle yield curve
IMF chief economist Gita Gopinath indicates that competitive currency devaluation may be an ineffective solution to improving export prospects. In the form of gradual interest rate cuts, Chinese expansionary monetary policy decisions help stimulate domestic demand for consumption goods, services, and capital investments.
However, this monetary expansion may inevitably weaken the Chinese renminbi against the U.S. dollar and other core OECD currencies. This competitive currency devaluation renders Chinese exports more affordable. Meanwhile, this currency devaluation reduces global demand for more expensive Chinese imports. In the broader context of international trade, nevertheless, the recent empirical evidence shows that each 10% currency depreciation improves the trade balance by only 0.3% of real GDP economic output ceteris paribus. This evidence remains robust after the econometrician takes into account multi-year exchange rate fluctuations in response to interest rate cuts and other expansionary monetary policy decisions.
In light of these robust results, monetary expansion alone is unlikely to cause the large and persistent currency devaluation that the central bank needs to stimulate economic growth, employment, and capital accumulation. This economic insight further applies to the recent dovish interest rate cuts that the U.S. Federal Reserve institutes in response to a vocal president.
If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.
2019-01-07 18:42:00 Monday ET

Neoliberal public choice continues to spin national taxation and several other forms of government intervention. The key post-crisis consensus focuses on go
2018-12-19 17:41:00 Wednesday ET

Tencent Music Entertainment debuts its IPO on NYSE to strike a chord with stock market investors. Tencent Music goes public and marks the biggest IPO by a m
2023-09-14 09:28:00 Thursday ET

Colin Camerer, George Loewenstein, and Matthew Rabin assess the recent advances in the behavioral economic science. Colin Camerer, George Loewenstei
2018-05-10 07:37:00 Thursday ET

Top money managers George Soros and Warren Buffett reveal their current stock and bond positions in their recent corporate disclosures as of mid-2018. Georg
2017-08-19 14:43:00 Saturday ET

In a recent tweet, President Donald Trump criticizes Amazon over taxes and jobs. Without providing specific evidence, Trump accuses of the e-commerce retail
2019-05-02 13:30:00 Thursday ET

Netflix has an unsustainable business model in the meantime. Netflix maintains a small premium membership fee of $9-$14 per month for its unique collection