Lee Jackson - Final Thesis - Economics - Stanford University

More documents

Recommendations

Info

Data as of September 30, 2011. Note: National residential building selling price through 2010, index of new residential building prices in Beijing and Shanghai post 2010. Source: NBS (2011), Haver, KKR Macro and Asset Allocation Source: IMF (2012) Figure 3.6: Urban Property Prices in China Figure 3.7: PBoC Balance Sheet Expansion 30
the ascent of urban property prices in Japan was faster and sharper than which that occurred in China, an idea we will revisit momentarily. Other data from Global Property Guide (2012) shows nominal nationwide house price annualized growth peaked at more than 40% in 2008, when the RMB last appreciated before the failure of Lehman Brothers. Also during the 2000s, China’s foreign exchange reserves realized significant growth, which similar to the advance of urban property prices, was less sudden compared to that in Japan after the Plaza Accord. Among other factors responsible for the relatively sharp advance in Japan’s reserves and urban property prices, the RMB appreciation in 2005 was a unilateral operation, while the JPY appreciation in 1985 was a multilateral operation. In addition, compared to past Japan, recent China had looser capital controls before its currency started to appreciate, allowing for greater inflows of hot money. Since the turn of the millennium, the PBoC has multiplied its balance sheet by a factor of approximately five to defend against hot money inflows (see Figure 3.7). At the same time, note that China’s foreign exchange accumulation slowed from late 2008 to early 2009, when the financial crisis centered in the U.S. caused hot money flows to reverse and the USD to appreciate (Davies, 2011). In other words, we can see empirically that reserve accumulation not only picks up during periods of hot money inflows and domestic currency appreciation, but also slows down during periods when hot money inflows subside and the domestic currency is comparatively stable. Having demonstrated the relationship between capital flows and exchange rates, we next will examine the interaction between capital flows and monetary policy. 31
Page 1 and 2: An Analysis of the Appreciation of
Page 3 and 4: 1 Introduction Over the past decade
Page 5 and 6: Our objective is not to determine t
Page 7 and 8: Tradable products generally are def
Page 9 and 10: labor market homogeneity via the ba
Page 11 and 12: Japanese yen (JPY) and the Chinese
Page 13 and 14: level, which has a one-for-one impa
Page 15 and 16: Figure 2.1: Wage Growth Differentia
Page 17 and 18: manufacturing, peaked in 2006 and 2
Page 19 and 20: Figure 2.5: CPI and WPI Comparison
Page 21 and 22: agreements and JVs with domestic fi
Page 23 and 24: the past several months may be a si
Page 25 and 26: 3.1 The International Fisher Effect
Page 27 and 28: !"#$%&'" (# '# &# "# $# %# !$# !"#
Page 29: !"#$%&'" the primary mainland bench
Page 33 and 34: money inflows when interest rates a
Page 35 and 36: 4 Exchange Rates, Spending Habits,
Page 37 and 38: Figure 4.1: Japan Multilateral Trad
Page 39 and 40: has been in decline since the mid-1
Page 41 and 42: China’s gross savings as a percen
Page 43 and 44: Figure 4.9: U.S. Personal Savings R
Page 45 and 46: Figure 5.1: The U.S.’ Role as the
Page 47 and 48: Figure 5.2: Volatility of Nominal E
Page 49 and 50: used to eliminate trade imbalances.
Page 51 and 52: Figure 5.3: The Fleeting 1991 U.S.
Page 53 and 54: domestic asset markets. To avoid a
Page 55 and 56: References Beamish, Paul W. 1993.
Page 57: McVey, Henry H. "Global Macro Trend

Lee Jackson - Final Thesis - Economics - Stanford University

Create successful ePaper yourself

Delete template?

Save as template?