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The Euro and the Yuan: Some Political Economy Considerations

Author

Listed:
  • Nathalie Aminian

    (University of Rouen, 3, avenue Pasteur - 76186 Rouen Cedex, France)

  • K. C. Fung

    (Department of Economics, University of California, Santa Cruz, CA 95064, USA)

  • Maurice K. S. Tse

    (School of Economics and Finance, University of Hong Kong, KK Leung Building, Pokfulam Road, Hong Kong)

Abstract

This paper sets out a political economy model of exchange rates, focusing on the importance of lobbying. Applying it to the Euro and the Chinese Yuan, we show that pressure groups in China can influence the determination of exchange rate. Furthermore, international negotiations could theoretically lead to an appreciation of the Chinese Yuan. We further extend the political economy model to include some of the special characteristics of Chinese trade such as the prevalence of processing trade and foreign-invested enterprises. Our paper makes a theoretical contribution in linking the Yuan, the Euro, trade disputes and politics. High unemployment and sluggish growth in Europe have led many European voters to put pressure on their governments and Brussels to take a tougher stance in trade disputes with China, leading to a form of “China bashing”.

Suggested Citation

  • Nathalie Aminian & K. C. Fung & Maurice K. S. Tse, 2016. "The Euro and the Yuan: Some Political Economy Considerations," China Economic Policy Review (CEPR), World Scientific Publishing Co. Pte. Ltd., vol. 5(01), pages 1-13, June.
    • Handle: RePEc:wsi:ceprxx:v:05:y:2016:i:01:n:s1793969016500023
    DOI: 10.1142/S1793969016500023
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    References listed on IDEAS

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    Cited by:

    1. Fung, Kwok-chiu & Aminian, Nathalie & Korhonen, Iikka & Wong, Keith K. P., 2017. "The Chinese Yuan: Influence of interest groups examined," BOFIT Policy Briefs 6/2017, Bank of Finland Institute for Emerging Economies (BOFIT).
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    3. Xiangjun Ma & John McLaren, 2018. "A Swing-State Theorem, with Evidence," NBER Working Papers 24425, National Bureau of Economic Research, Inc.

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