China’s Growth Model

According to some preliminary estimates (link), China’s trade balance is on the course for a significant surplus this year. IMF’s annual forecast of current account balance predicted China’s trade surplus at $334 billion in 2010 or roughly 6.2 percent of China’s GDP. The IMF’s medium-term forecast suggests a growing trade surplus by 2015 when . . . → Read More: China’s Growth Model

Interesting Readings for July 16, 2010

The top selling Indian newspapers according to Amazon’s kindle subscriptions.

India’s courts may be in a slow process of reshaping India into a liberal democracy. Here is a Supreme Court ruling which blocks the Maharasthra government from interfering with the rights of a citizen to read a certain book. Sadly, it was done . . . → Read More: Interesting Readings for July 16, 2010

Risk On

Someone tried to make the point that the making the Yuan more flexible was already “priced in”; well it might be of course, but so far markets are bathing in serious risk on mode. Copper futures up some 4.5%, AUD/USD at 0.88ish and I could go on and on …

Enjoy it while it . . . → Read More: Risk On

Structural Change in the Indian Exchange Rate Regime

The rupee/dollar rate has gained in flexibility. In order to visualise what has changed, it’s useful to look at a graph of the time-series of weekly percentage changes, expressed in absolute terms. That is, a change of -3% or +3% is shown as a bar of height 3 in this graph:

The vertical blue . . . → Read More: Structural Change in the Indian Exchange Rate Regime

China’s Exchange Rate and American Jobs

Here’s a brief reading list on the issue of China’s exchange rate and US manufacturing jobs:

Simon J. Evenett and Joseph Francois on whether Chinese currency revaluation will create net jobs for the US economy (link).

William R. Cline’s discussion of estimating the effect of renmimbi appreciation on American jobs (link).

Abdul Abiad, Daniel . . . → Read More: China’s Exchange Rate and American Jobs

China’s Exchange Rate Policy

Paul Krugman (link) and Greg Mankiw (link) analyze the costs and benefits of China’s exchange rate policy.

Exchange Rate Regime of Systemically Important Countries

Many people believe that the exchange rate regime (i.e. the monetary policy regime) of each country is its own sovereign choice.

In the Great Depression, we saw the harmful effects of the exchange rate mercantalism that is feasible with fiat money. This was a key motivation for Keynes and others in their design of . . . → Read More: Exchange Rate Regime of Systemically Important Countries

Too Much of a Good Thing in Australia?

It is indeed an old adage that while goods things are to be preferred over bad things it is possible to get too much of the former. Looking at recent comments from the governor of the Reserve Bank of Australia it is not difficult to imagine how these, albeit old and worn, pearls of . . . → Read More: Too Much of a Good Thing in Australia?

Decoupling Theory: How Well-Insulated Are Asia and Australia?

The Australian dollar reaching for parity with the U.S. dollar, marked by the horizontal green line near the top of the black screen. So close. As the U.S. economy slowed during the fourth quarter of 2007 and the first quarter of 2008, everybody knew that Canada would, sooner or later, be dragged down along . . . → Read More: Decoupling Theory: How Well-Insulated Are Asia and Australia?

Travelers Head for Cheaper Destinations Abroad

Europe has long been a favored travel destination for American travelers. In spite of the dollar’s downward spiral, Americans continue to flock to Italy, the UK, Germany and a few other favorites. As the dollar passes the $1.56 mark against the euro (remember the days when they were essentially equal?), travel has been only . . . → Read More: Travelers Head for Cheaper Destinations Abroad