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China and the Dollar: An Optimum Currency Area View

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  • Chee-Heong Quah
  • Patrick M. Crowley

Abstract

This paper attempts to assess how compatible China is with respect to its dollar-based exchange rate regime. Assessment is made in terms of the real convergence criteria suggested by the optimum currency areas (OCA) theory. In light of the endogenous problem in OCA analysis and this view of convergence criteria, the relevant features of China are evaluated against economies implementing rigid dollar standard in practice, namely Hong Kong, Macau, and Panama. Findings suggest that economic conditions in China broadly conform to those prevailing in these economies which maintain strong links to the US dollar.

Suggested Citation

  • Chee-Heong Quah & Patrick M. Crowley, 2012. "China and the Dollar: An Optimum Currency Area View," Prague Economic Papers, Prague University of Economics and Business, vol. 2012(4), pages 391-411.
    • Handle: RePEc:prg:jnlpep:v:2012:y:2012:i:4:id:431:p:391-411
    DOI: 10.18267/j.pep.431
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    Cited by:

    1. Chee-Heong Quah, 2016. "A Diagnostic on the West African Monetary Union," South African Journal of Economics, Economic Society of South Africa, vol. 84(1), pages 129-148, March.
    2. Chee-Heong Quah, 2011. "Is East Asia as prepared as eurozone for monetary union?," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 13(3), pages 471-488, April.
    3. Chee-Heong Quah, 2017. "Exchange Rate Fixation between US, China, Japan and Eurozone," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 11(2), pages 99-120, May.

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    More about this item

    Keywords

    exchange rate; dollarization; China; optimum currency area; renminbi; Hong Kong; Macau; money;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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