Campus Units

Economics

Document Type

Article

Publication Version

Accepted Manuscript

Publication Date

1-2016

Journal or Book Title

International Review of Economics and Finance

Volume

41

First Page or Article ID Number

253

Last Page

261

DOI

10.1016/j.iref.2015.08.008

Abstract

This paper investigates whether China, with unemployed resources, can benefit from a trade surplus in one period and a deficit in the next by manipulating the yuan's peg. A country may be tempted to stimulate its economy temporarily by devaluation, but any surplus so generated subsequently must be expended with inescapable reverse output effect. It is shown that under reasonable conditions, nonintervention is the optimal policy and the optimal exchange rates are the equilibrium rates that yield a trade balance in each period. Numerical examples using the Cobb–Douglas utility function illustrate the main proposition.

JEL Classification

F1

Comments

This is a mansuscript of an article published as Jin, Hailong, Yoonho Choi, and E. Kwan Choi. "Unemployment and optimal currency intervention in an open economy." International Review of Economics & Finance 41 (2016): 253-261. doi: 10.1016/j.iref.2015.08.008. Posted with permission.

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Copyright Owner

Elsevier Inc.

Language

en

File Format

application/pdf

Published Version

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