Robert M. La Follette School of Public Affairs

The Exchange Rate and Global Imbalances

The author assesses China's role in the evolution of global imbalances in the context of standard models of current account balances, as well as recent interpretations (e.g., the "saving glut" and "asset shortage"). The exchange rate is interpreted as an equilibrium price. He reviews the evidence in a partial equilibrium framework for how the exchange rate affects the trade balance. The empirical evidence supports the view that exchange rate movements can affect the volume of trade flows.

Additional Info

  • Volume or issue no.: La Follette School Working Paper No. 2012-015
  • Author(s): Menzie D. Chinn