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Effects of Chinas Foreign Exchange Policies Effects on Price Stability(PDF)

《南京师大学报》(社会科学版)[ISSN:1006-6977/CN:61-1281/TN]

Issue:
2013年05期
Page:
56-63
Research Field:
Publishing date:

Info

Title:
Effects of Chinas Foreign Exchange Policies Effects on Price Stability
Author(s):
SHEN Yong FENG Sixian
Keywords:
foreign exchange rate foreign exchange policies foreign exchange reserves appreciation of RMB price stability
PACS:
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DOI:
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Abstract:
For a long time, China has followed a “half open and half closed” foreign exchange policy. It means that the mechanism of foreign exchange policies on price stability in China will be significantly different from those of other open economies. This paper shows that foreign exchange rate policies always interfere with foreign exchange reserve policies when maintaining price stability. The effect of foreign exchange reserve policies on price is much stronger than exchange rate policies. The effect on domestic prices by the appreciation of RMB is offset by the increase of foreign exchange reserves. The acting direction of RMBs appreciation on domestic prices may be even reversed by excessive foreign exchange reserves. The appreciation of RMB will not be helpful to lower domestic price level. China should not pursue simple growth in foreign exchange reserves. It has to reduce the negative impact on domestic price stability by excessive foreign exchange reserves.

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Last Update: 2013-09-25