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Does U.S. Pressure Lead to Changes in China’s Exchange Rate?

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  • Paul Bowles
  • Baotai Wang

Abstract

The role of external political pressure in the appreciation of the Chinese renminbi against the U.S. dollar since 2005 has been the subject of debate. While Chinese authorities maintain that only domestic considerations have played a role, whether the appreciation has also been the result of the exercise of international monetary power by the United States has been examined using three different approaches. The results have been contradictory with the weight of studies finding against U.S. pressure having an effect on the exchange rate. In this article, we use Granger causality tests to reexamine the issue using data from 2000–2014. We find evidence that U.S. pressure does Granger-cause renminbi appreciation. We also examine whether U.S. pressure causes the changes in China’s export tax rebates. We find no evidence for this.

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  • Paul Bowles & Baotai Wang, 2016. "Does U.S. Pressure Lead to Changes in China’s Exchange Rate?," International Journal of Political Economy, Taylor & Francis Journals, vol. 45(2), pages 147-166, April.
    • Handle: RePEc:mes:ijpoec:v:45:y:2016:i:2:p:147-166
    DOI: 10.1080/08911916.2016.1185318
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    Cited by:

    1. Guo, Wei & Chen, Zhongfei & Šević, Aleksandar, 2021. "The political pressure from the US upon RMB exchange rate," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 73(C).
    2. Zhang, Qisi & Frömmel, Michael & Baidoo, Edwin, 2024. "Donald Trump's tweets, political value judgment, and the Renminbi exchange rate," International Review of Financial Analysis, Elsevier, vol. 93(C).
    3. Dimitar Gueorguiev & Daniel McDowell & David A. Steinberg, 2020. "The Impact of Economic Coercion on Public Opinion: The Case of US–China Currency Relations," Journal of Conflict Resolution, Peace Science Society (International), vol. 64(9), pages 1555-1583, October.

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