publication . Article . Preprint . 2005

Currency Manipulation versus Current Account Manipulation

Junning Cai;
Open Access
  • Published: 24 Oct 2005 Journal: SSRN Electronic Journal (eissn: 1556-5068, Copyright policy)
  • Publisher: Elsevier BV
Abstract
It is said that a country’s currency peg can become currency manipulation representing protracted government intervention in the foreign exchange market that gives it unfair competitive advantage in international trade yet prevents effective balance of payments in its trade partners. Regarding this widespread fallacy, this paper explains why currency peg is not currency manipulation even when it keeps a country’s currency undervalued. We clarify that 1) government is inherently a major player in the financial market and hence “no protracted intervention” is a meaningless guideline for designating currency manipulation; 2) exchange rate flexibility is neither a s...
Subjects
free text keywords: currency manipulation; current account; exchange rate; RMB controversies, Economics, Exchange-rate flexibility, Devaluation, Sterilization (economics), Monetary economics, Special drawing rights, Current account, Currency, Balance of payments, Foreign exchange risk, International economics, jel:E52, jel:F31, jel:F32
Related Organizations

Adams, Timothy D. (2005). “The U.S. view on IMF reform,” Remarks at the Conference on IMF Reform, Institute for International Economics, Washington, DC, September 23, 2005.

Bergsten, F.C. (2004). “IMF and exchange rates,” Testimony in Congressional Oversight of the IMF and World Bank, Hearing before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, May 19, 2004.

Blanchard, Olivier, Giavazzi, F., and F. Sa (2005). “The U.S. current account and the dollar,” NBER Working Paper No. 11137. [OpenAIRE]

Dooley, Michael, David Folkerts-Landau, and Peter Garber (2003). “An essay on the revived Bretton Woods system,” NBER Working Paper No. 9971. [OpenAIRE]

McKinnon, Ronald (2003b). “China's exchange rate,” Asian Wall Street Journal, 27, June 2003.

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