Rebalancing Growth in China: An International Perspective
CEPII Working Paper, N°2011-08, April 2011
51 Pages Posted: 28 May 2015
Date Written: April 2011
Based on simulations of an original DGE model of the US, Chinese and Euro area economies with ﬁnancial frictions and various monetary regimes, the paper shows that the contribution of China in global rebalancing should primarily rely on structural policies aiming at reducing aggregate savings in China. The role of the exchange-rate regime would be minor under standard monetary policies, although more important if monetary policies in advanced countries are constrained, as they are today. Finally, relying only on a change in China’s monetary regime (without structural reforms) could end up in delaying rather than accelerating the rebalancing, depending on China’s policy regarding accumulated reserves.
Keywords: Global imbalances, exchange rate regimes, capital controls, China
JEL Classification: F32, F42, F47
Suggested Citation: Suggested Citation