Rural-led exchange rate appreciation in China
- Publication Type:
- Journal Article
- China Economic Review, 2016, 39 pp. 15 - 30
- Issue Date:
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© 2016 Elsevier Inc. The departure of a factor in excess supply in a non-traded rural sector leads to a Rural-led Exchange Rate Real Appreciation (RERA), in a dual economy setup. The RERA highlights for the first time a potential link between intra-national factor movements and real exchange rates. In China, where there is excess labor employed in the production of (largely) non-traded rural goods, we attribute around one third of the recent appreciation of the real exchange rate - defined as the relative price of nontradables - to a RERA effect.
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