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.
2018-10-17 12:33:00 Wednesday ET

The Trump administration blames China for egregious currency misalignment, but this criticism cannot confirm *currency manipulation* on the part of the Chin
2017-02-01 14:41:00 Wednesday ET

President Trump refreshes his public image through his presidential address to Congress with numerous ambitious economic policies in order to make America g
2018-07-09 09:39:00 Monday ET

The Federal Reserve raises the interest rate again in mid-2018 in response to 2% inflation and wage growth. The current neutral interest rate hike neither b
2019-02-03 13:39:00 Sunday ET

It can be practical for the U.S. to impose the 2% wealth tax on the rich. Democratic Senator Elizabeth Warren proposes a 2% wealth tax on the richest Americ
2018-06-08 13:35:00 Friday ET

The Federal Reserve delivers a second interest rate hike to 1.75%-2% and then expects subsequent rate increases in September and December 2018 to dampen inf
2017-05-01 09:45:00 Monday ET

Apple now pursues an early harvest strategy that focuses on extracting healthy profits from a relatively static market for the Mac, iPhone, and iPad, all of