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Title: |
The Impacts of RMB REER Appreciation on the Chinese Economy |
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Source: |
International Conference on Network and Finance Development (NFD 2010 PAPERBACK)
(pp 360-363)
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Author(s): |
Jie Xie, School of Finance, Shanghai University of Finance and Economics, Shanghai, China School of Economic, Zhejiang Gongshang University, Hangzhou, China |
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Abstract: |
Exchange rate is one of the core economic variables in an open economy, which exerts a profound influence on export and import; and export and import are closely related to national revenue and welfare. In recent years, with China’s ever-expanding economy and further integration of global trade, RMB appreciation has become a hot-debated issue. Thus, this paper shall explore a Computable General Equilibrium (CGE) model to evaluate quantitatively the impact of the appreciation of RMB real effective exchange rate (REER) on Chinese economy. The base year database for our CGE model--Social Accounting Matrix (SAM) of year 2005 is constructed based on the latest 2005 input-output tables of China. The main results are as follows: RMB REER appreciation reduces the output of most sectors, except for the construction and services sector. Increased demand for the construction and services sector induces more output because currency revaluation’s wealth effect causes the domestic purchasing power to strengthen. RMB REER appreciation reduces demands for agricultural labor and most non-agricultural labor. Increased demand for the construction and services sector also induces more labor demand.
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