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Original Articles

Currency appreciation, rising financial asset values, and output fluctuations in China

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Pages 853-857 | Published online: 08 May 2009
 

Abstract

Applying a general equilibrium model and the Newey-West method, this article finds that real output in China has a positive relationship with real M2, the government deficit/GDP ratio, and the real stock price and a negative relationship with real appreciation. The expected inflation rate is insignificant. It is estimated that when the real effective exchange rate rises 1%, real GDP in China is expected to decrease by 0.938% and that a 1% increase in real stock prices would raise output by 0.126%.

Notes

1 For more studies and reviews of exchange rates, see Taylor Citation(1995), Sarno and Taylor Citation(2002) and Taylor and Sarno Citation(2004).

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