Thursday, June 18, 2015

China's Managed Float of the Yuan

The Wall Street Journal reports that China is evaluating whether to allow the yuan to depreciate due to market forces.  In my Global Economics and Business class, we talk about countries that have a managed float system for exchange rates and that in the short-run monetary policy is used to maintain the rate at which the nations domestic currency is traded for a foreign currency, but in the long-run market forces determine the exchange rate.  This is a good example of the long-run case, where an appreciation of the US dollar and declining growth rates in China are putting downward pressure on the yuan (renminbi).

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