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Article: Unification of China's foreign exchange rates
- Article from:
- Contemporary Economic Policy
- Article date:
- October 1, 1996
- Author:
CopyrightCopyright Western Economic Association Oct 1996. Provided by ProQuest LLC. (Hide copyright information)
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GUOBO HUANG and CLEMENT YUK-PANG WONG*
This paper studies China's foreign exchange market before and after the 1994 unification of the official and swap exchange rates. Examining segmentation as well as linkages among the foreign exchange adjustment centers (FEACs) reveals that the linkages were not strong enough to eliminate or narrow price differentials among FEACs. Hence, improving the foreign exchange market's efficiency requires a reform to unify the swap rates. This paper discusses the unification's implications for inflation, monetary policy, and current account convertibility.
1. INTRODUCTION
On January 1,1994, China took a major step toward currency convertibility by unifying ...