The Impacts of RMB REER Appreciation on the Chinese EconomyReport as inadecuate




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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.

KEYWORDS

RMB REER; Computable General Equilibrium CGE; Social Accounting Matrix SAM; Chinese economy

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Author: Jie Xie

Source: http://www.scirp.org/



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