Tuesday, July 26, 2005

For What It's Worth

China has fallen into the classic problem of fixed-but-adjustable exchange rate regimes.
If you aren't sure why this is a problem, you obviously aren't reading Survived SARS' coverage of the Chinese economy. Shame on you.
In a recent post entitled "See Any Appreciation Yet?", Logan analyzes the weakness of a fixed-but-adjustable rate (FBAR). The cliff notes version is that they are losing credibility and increasing politicization of the exchange rate, but for the whole explanation you have to head over to Survived SARS.