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China’s External Surplus: Simulations with a Global Macroeconomic Model

Lukas Vogel, European Commission

China’s External Surplus: Simulations with a Global Macroeconomic Modelpdf(785 kB) Choose translations of the previous link 

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The paper analyses China's external position in a multi-region macroeconomic model of the world economy. The model includes a portfolio structure and Forex intervention to proxy net/gross and government/non-government foreign asset positions, capital controls and exchange rate management in China. The selected set of transition and globalisation shocks replicates China's external position well, suggesting that it reflects capital exports driven by shifts in domestic saving supply, rather than shifts in foreign saving demand. The simulations also highlight the importance of effective capital controls for the viability of China's exchange rate management. Finally, the analysis suggests that enhanced flexibility of the RMB exchange rate could reduce China's net creditor position.

(European Economy. Economic Papers. 430. December 2010. Brussels. PDF. 37pp. Tab. Graph. Bibliogr. Free.)

KC-AI-10-430-EN-N (online)
ISBN 978-92-79-14916-0 (online)
ISSN 1725-3195
doi:10.2765/445822 (online)

JEL classification: F30, F40

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