Rural-led exchange rate appreciation in China |
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Affiliation: | 1. University of Technology Sydney, Australia;2. University of Wisconsin–Madison, United States;3. Victoria University, Australia;1. Vrije Universiteit Brussel, Department of Clinical and Lifespan Psychology, Pleinlaan 2, 1050 Brussels, Belgium;2. Opvang vzw department Brabant, Jetsesteenweg 603, 1090 Brussels, Belgium;1. University of Trento, School of International Studies, via T. Gar 14, 38122 Trento Italy;2. IEFE, Bocconi University, via Guglielmo Roentgen 1, 20136 Milano Italy;3. University of Trento, Department of Economics and Management, via Inama 5, 38122 Trento Italy;4. OFCE-SciencesPo, DRIC, 60 rue Dostoïevski 06902 Sophia Antipolis France;5. IMT Alti Studi Lucca, Piazza S. Ponziano 6, 55100 Lucca (Italy);6. KU Leuven, Department of Managerial Economics, Strategy and Innovation, Naamsestraat 69, B 3000, Leuven (Belgium);1. Department of Political Science, Pennsylvania State University, 210 Pond Lab, University Park, PA 16802, United States;2. Department of Economics, University of South Florida, CMC 207H, E. Fowler Ave, Tampa, FL 33620, United States |
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Abstract: | 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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