The Political Economy of 'Currency Manipulation' Bashing
29 Pages Posted: 6 Nov 2011
Date Written: September 25, 2011
Abstract
One of the most frequently debated issues in Congress over the past few years has been the value of the Chinese renminbi (RMB) relative to the dollar. It is no secret that congressmen in the U.S. frequently accuse China of being a “currency manipulator.” This paper has two objectives. First, it investigates the extent to which PAC contributions from key interest groups influences the frequency with which congressmen criticize China’s exchange rate policy, controlling for other factors. The results indicate that the odds that a congressman will call China a “currency manipulator” are 1.35 times higher for every additional $5,000 in PAC contributions from groups that favor legislation against China. The odds go up to 1.8 for an additional $10,000 in PAC contributions. Second, it investigates the consequences that “currency manipulation” bashing may have on the rate at which the RMB appreciates against the U.S. dollar. The results for a VAR model indicate that an increase in the incidence of “currency manipulation” bashing appears to slow down, rather than accelerate, the rate at which the Renmibi appreciates against the dollar. This last result suggests that bashing China may actually be counterproductive.
Keywords: Currency manipulation, China bashing, PAC Contributions
JEL Classification: F59, D72
Suggested Citation: Suggested Citation
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