Huang, Hui and Wang, Yiming and Whalley, John and Zhang, Shunming (2012) A Simple Trade Model with an Optimal Exchange Rate Motivated by Discussion of a Renminbi Float. Modern Economy, 03 (05). pp. 526-533. ISSN 2152-7245
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Abstract
We present a model of combined inter-spatial and inter-temporal trade between countries in which there is a fixed ex-change rate with a surrender requirement for foreign exchange generated by exports. The model incorporates inter- temporal intermediation services, which may or may not be liberlized across countries. We use numerical simulation methods to explore the properties of the model, since it has no closed form solution. In this model, when services re-main unliberalized there is an optimal trade intervention, even in the small open price taking economy case. Given monetary policy and an endogenously determined premium value on foreign exchange, an optimal setting of the ex-change rate can provide the optimal trade intervention. We suggest this model may have loose relevance for the current situation in China where services remain unliberalized and tariff rates are bound in the WTO and a free Renminbi float is under discussion.
Item Type: | Article |
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Subjects: | Digital Academic Press > Multidisciplinary |
Depositing User: | Unnamed user with email support@digiacademicpress.org |
Date Deposited: | 04 Jul 2023 05:01 |
Last Modified: | 17 May 2024 10:29 |
URI: | http://science.researchersasian.com/id/eprint/1642 |