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Currency appreciation, rising financial asset values, and output fluctuations in China

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  • Yu Hsing
  • Wen-Jen Hsieh

Abstract

Applying a general equilibrium model and the Newey-West method, this article finds that real output in China has a positive relationship with real M2, the government deficit/GDP ratio, and the real stock price and a negative relationship with real appreciation. The expected inflation rate is insignificant. It is estimated that when the real effective exchange rate rises 1%, real GDP in China is expected to decrease by 0.938% and that a 1% increase in real stock prices would raise output by 0.126%.

Suggested Citation

  • Yu Hsing & Wen-Jen Hsieh, 2009. "Currency appreciation, rising financial asset values, and output fluctuations in China," Applied Economics Letters, Taylor & Francis Journals, vol. 16(8), pages 853-857.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:8:p:853-857
    DOI: 10.1080/13504850701222061
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