Choosing an exchange rate regime during economic transition: the case of China

Zhang, Z.

Abstract

The choice of an appropriate exchange rate regime during economic transition is investigated through the case of China's 1994 reform programme. Within a game-theoretic framework, the paper compares welfare under alternative policy regimes. While not upsetting government welfare, China's exchange rate unification through a floating rate has compelling benefits as a means of aborting the multiple practice. Given the choice of a flexible rate regime for convertibility, numerical simulations show a managed floater is favourable and may additionally mitigate the credibility problem associated with convertibility. Simulation outcomes also reveal China's policy preference is to place a higher weight on competitiveness than on inflation.

Citation

Zhang, Z. (2001). Choosing an exchange rate regime during economic transition: the case of China. China Economic Review, 12(2-3), 203-226. https://doi.org/10.1016/s1043-951x%2801%2900051-7

• Journal Article Type: Article
• Publication Date: Aug 1, 2001
• Deposit Date: Jun 21, 2007
• Journal: China Economic Review
• Print ISSN: 1043-951X
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 12
• Issue: 2-3
• Pages: 203-226
• DOI: https://doi.org/10.1016/s1043-951x%2801%2900051-7
• Keywords: China, Exchange rate policy, Economic transition.
• Public URL: https://durham-repository.worktribe.com/output/1564797