Rural-led exchange rate appreciation in China

Gordon Menzies, Sylvia Xiaolin Xiao, Peter Dixon, Xiujian Peng and Maureen Rimmer

China Economic Review, 2016, vol. 39, issue C, 15-30

Abstract: The departure of a factor in excess supply in a non-traded rural sector leads to a Rural-led Exchange Rate Real Appreciation (RERA), in a dual economy setup. The RERA highlights for the first time a potential link between intra-national factor movements and real exchange rates. In China, where there is excess labor employed in the production of (largely) non-traded rural goods, we attribute around one third of the recent appreciation of the real exchange rate – defined as the relative price of nontradables – to a RERA effect.

Keywords: Exchange rates; Dual economy; Balassa–Samuelson Effect; China (search for similar items in EconPapers)
JEL-codes: F11 F31 F43 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:39:y:2016:i:c:p:15-30

DOI: 10.1016/j.chieco.2016.03.001

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