Contents
Foreword..................................................................................................................................iii
Conference programme............................................................................................................v
Abstract and executive summary............................................................................................vii
China’s financial conundrum and global imbalances
(by Ronald McKinnon and Gunther Schnabl)
1.Introduction......................................................................................................................1
2.Three phases of the Yuan-Dollar exchange rate.............................................................2
Phase 1...........................................................................................................................2
Phase 2...........................................................................................................................2
Phase 3...........................................................................................................................4
3.Currency mismatches in immature creditor economies...................................................5
Conflicted virtue...............................................................................................................7
Anticipatory sterilisation and sovereign wealth funds......................................................8
Sterilisation and its limits:the Chinese case...................................................................9
Open interest parity and monetary control....................................................................11
4.Overcoming three misconceptions about currency stabilisation....................................13
Misconception#1:the exchange rate can affect the trade balance..............................14
Misconception#2:Ongoing exchange rate appreciation reduces inflation...................14
Misconception#3:Floating the rate would equilibrate the foreign exchange market...15
5.Toward a credibly fixed exchange rate..........................................................................16
References.............................................................................................................................18
Figures....................................................................................................................................19
Table 1....................................................................................................................................36
Discussant comments by Michael Mussa..........................................................................37