Putting the Cart Before the Horse? Capital Account Liberalization and Exchange Rate Flexibility in China

This paper reviews the issues involved in moving towards greater exchange rate flexibility and capital account liberalization in China. A more flexible exchange rate regime would allow China to operate a more independent monetary policy, providing a useful buffer against domestic and external shocks...

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Bibliographic Details
Main Author: Prasad, Eswar
Other Authors: Rumbaugh, Thomas, Wang, Qing
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2005
Series:IMF Policy Discussion Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper reviews the issues involved in moving towards greater exchange rate flexibility and capital account liberalization in China. A more flexible exchange rate regime would allow China to operate a more independent monetary policy, providing a useful buffer against domestic and external shocks. At the same time, weaknesses in China's financial system suggest that capital account liberalization poses significant risks and should be a lower priority in the short term. This paper concludes that greater exchange rate flexibility is in China's own interest and that, along with a more stable and robust financial system, it should be regarded as a prerequisite for undertaking a substantial liberalization of the capital account
Physical Description:32 pages
ISBN:9781451975451