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Coexistence of Sustained External Imbalance and Real Exchange Rate Misalignment: The Underlying Fundamentals

Author

Listed:
  • Chen Fang

    (Department of International Trade, Takming University of Science and Technology, Taiwan)

  • Cheng-te Lee

    (Department of International Trade, Chinese Culture University, Taiwan)

Abstract

By focusing on the macroeconomic effects of temporary price shocks, this note clarifies the relationships among the terms of trade, the real exchange rate and the current account. This clarification suggests that a real depreciation might prove incapable of bringing the external imbalance back to a sustainable level.

Suggested Citation

  • Chen Fang & Cheng-te Lee, 2014. "Coexistence of Sustained External Imbalance and Real Exchange Rate Misalignment: The Underlying Fundamentals," Economics Bulletin, AccessEcon, vol. 34(3), pages 1714-1722.
    • Handle: RePEc:ebl:ecbull:eb-14-00240
    as

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    References listed on IDEAS

    as
    1. Willem Thorbecke & Gordon Smith, 2010. "How Would an Appreciation of the Renminbi and Other East Asian Currencies Affect China's Exports?," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 95-108, February.
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    More about this item

    Keywords

    terms of trade; current account; real exchange rate; intratemporal substitutability.;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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