آیا نقش یک مدل برای چین است ؟ انعطاف پذیری نرخ ارز و سیاست پولی در ژاپن
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|26387||2008||14 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : China Economic Review, Volume 19, Issue 2, June 2008, Pages 183–196
A substantial number of papers have proposed to allow for more exchange rate flexibility of the Chinese yuan. But few papers have tried to project how Chinese monetary policy will behave under flexible exchange rates. As Japan provides an important role model for China, this paper studies the role of the yen/dollar exchange rate for Japanese monetary policy after the shift of Japan from a fixed to a floating exchange rate regime. In contrast to prior studies, we allow for regime shifts in the impact of the exchange rate on monetary policy. The results show that the exchange rate had a substantial impact on Japanese monetary policy in periods of appreciation. This implies that repeated attempts to soften the appreciation pressure by interest rate cuts have led Japan into the liquidity trap. The economic policy conclusion for China is to keep the exchange rate pegged (to the dollar).
An increasing number of papers are discussing the pros and cons of more exchange rate flexibility of the Chinese yuan (Cheung et al., 2005, Cline, 2005, Frankel, 2006, Goldstein, 2003, Goodfriend and Prasad, 2007 and McKinnon and Schnabl, 2006). Proponents of a flexible yuan have stressed the need for macroeconomic flexibility in the economic catch-up process of the Chinese economy (Frankel, 2006 and Goldstein, 2003). Given buoyant capital inflows it has been argued that a substantial appreciation of the Chinese yuan would help to prevent a possible overheating of the Chinese economy and to correct the trade imbalance between China and the US (Goldstein, 2003). In contrast, proponents of the Chinese dollar peg have argued that the stability of the Chinese yuan against the dollar had a stabilizing impact not only for China itself but for East Asia as a whole (McKinnon, 2004 and McKinnon, in press). The reason is that growth tends to be led by exports and China's fast rising international assets are denominated in foreign currency (McKinnon & Schnabl, 2004). Furthermore, McKinnon and Schnabl (2006) have argued that for countries in the economic catch-up process fixed exchange rates provide a more stable framework for the adjustment of labour and asset markets. They argue that Japan's repeated attempts to soften (productivity driven) appreciation pressure by interest rate cuts have finally led Japan into the liquidity trap. Up to the present, comparatively few papers have focused on the question of how Chinese monetary policy is likely to behave under a flexible exchange rate regime. Japan provides an important case study for the prospects of the Chinese monetary policy under a freely floating exchange rate for at least four reasons. First, like in China today, growth in Japan has been traditionally led by exports (McKinnon & Ohno, 1997). Second, like Japan China is an important saving surplus country and has accumulated large stocks of dollar denominated international assets (McKinnon & Schnabl, 2004). Third, Japan has shifted from a fixed to a flexible exchange rate regime in the early 1970s which is recommended for China today. Forth, back in early 1970s up to the late 1980s Japan was in the economic catch-up process like China is today. In this context we are interested in the question of if and how in Japan “fear of appreciation” affected the Bank of Japans' interest rate decisions. A substantial number of previous studies ( Chinn and Dooley, 1998, Clarida et al., 1998, Esaka, 2000, Funabashi, 1988, Henning, 1994, Hillebrand and Schnabl, 2006, Hutchison, 1988 and McKinnon and Ohno, 1997) have acknowledged that despite the official status of a freely floating economy the exchange rate has played an important role for Japanese monetary policy, in particular in times of appreciation. But to our knowledge no paper has formally analyzed the asymmetric impact of the exchange rate on Japanese interest rate decisions in appreciation phases and has explored the respective impact on the stability of the Japanese economy and in particular on the liquidity trap. We want to trace the possibly changing impact of the yen/dollar exchange rate on Japanese monetary policy based on a rolling Taylor type monetary policy reaction function with an exchange rate term. This allows us to provide a dynamic picture of the role of the exchange rate for Japanese monetary policy. To make an assessment of the impact of the yen appreciation on Japan's liquidity trap we introduce an interaction term into the GMM framework. We will show that Japan's repeated attempts to soften appreciation pressure by discretionary interest rate cuts have contributed to substantial economic instability and Japan's fall into the liquidity trap.
نتیجه گیری انگلیسی
China faces today a similar decision like Japan faced in the early 1970s, i.e. a possible shift from a fixed to flexible exchange rate regime during the economic catch-up. The decision in July 2005 to release the hard peg to the dollar and to allow for a gradual but controlled appreciation of the Chinese yuan against the dollar can be seen as a first step into this direction. We studied for Japan the static and dynamic information content of Taylor-type monetary policy reaction functions with focus on the exchange rate. The Bank of Japan provides a suitable case study for China as in both countries growth has been strongly dependent on exports and the large international assets are dollarized. This makes both countries one-sided sensible to appreciations. The static and dynamic GMM estimations suggest that although the Bank of Japan has been officially labelled a freely floating economy it pursed – in contrast to the Federal Reserve – three targets of monetary policy making, i.e. low inflation, output stabilization and exchange rate stabilization. We argue that the Bank of Japan exchange rate targeting can be seen as a policy failure for mainly two reasons. First, as in the case of the Japanese bubble economy, undue monetary expansion to soften appreciation pressure has led to economic and financial instability. Second, in contrast to other managed floating economies, the monetary policy response to the exchange rate was asymmetric, i.e. restricted to appreciation phases which contributed to Japan's fall into the liquidity trap. The findings in this paper provide information to assess the currently three main options for the Chinese exchange rate policy, i.e. a hard peg, a free float or an intermediate solution (controlled appreciation). First, from the year 2001 – when the Federal Reserve started to cut interest rates drastically – the tight peg of the yuan to the dollar constituted a threat to the Chinese economy as buoyant capital inflows were translated into fast reserve accumulation and monetary expansion. An appreciation of the Chinese yuan in form of either a free float or a controlled appreciation can be seen as a remedy against the possible overheating for the Chinese economy. Second, we have shown above that a free float incorporates substantial risks for China where economic stability strongly depends on exports and the immense stock of international assets which is denominated in foreign currency. As a strong appreciation would constitute a substantial shock for the economic and financial stability it is not surprising that China hesitates to allow for full exchange rate flexibility. Third, given the US pressure, the Peoples Bank of China has allowed for a controlled appreciation of the yuan since July 2005. This may be an option to counteract the overheating of the Chinese economy. Yet it seems that the reserve accumulation and the monetary expansion have accelerated since then although the Federal Funs Rate has increased. The possible explanation is that appreciation expectations have become sustained and have invited one way bets on the appreciation of the Chinese currency. Thus, the controlled appreciation seems to have caused additional speculation and instability. The upshot is that countries in the economic catch-up process which are subject to current account surpluses and sustained real appreciation pressure can control speculative capital inflows only by a tight exchange rate peg which puts us back to option one. From our perspective the tight dollar peg would be stabilizing for the Chinese economy as long as US monetary policy is not very loose. As in Japan under the Bretton Woods System before the late 1960s (when US monetary policy started to expand) the peg would be stabilizing if the Federal Reserve continues to hold the federal funds rate tight. If the US interest rate would decline again, alternative anchors or currency baskets may be considered until the Chinese capital markets are sufficiently developed to move towards a free float.