A Theoretical And Empirical Study On The Problem Of America Accusing China Of Manipulating Currency

Currency dispute is one of the core problems in international financial field;especially the currency dispute between China and United States has been the focus ofinternational attention. Currency manipulation has been the focus of the disputebetween the two countries. Because of the huge trade deficits, United States accusesChina of violating relevant provisions of international law about national currencybehavior and manipulating RMB exchange rate. However, China holds that thebehavior of America is reflection of unilateral currency behavior under dollarhegemony and seeks basis to refute the accusation of America.Based on reviewing relevant literature about currency dispute between China andthe United States, we study the currency accusation behavior of America under relatedlaws of IMF and WTO and understand the substance of the problem. Then, under thetheoretical frame of currency determination, we adopt the method of new politicaleconomics to analysis the behavior motivations of America. We also adoptcomprehensive econometric model to inspect the impacts of various economic andpolitical factors to exchange rate movement, and then separate the motivations ofcurrency accusation from the various factors and analysis these motivations. Based onthe empirical analysis, we draws main conclusions that the increasing deficit ofAmerica indeed promote the appreciation of RMB, but it only helps to a certain extent.America always uses the continuous trade deficit as an important excuse to accuseChina of manipulating currency, but the importance degree and intuition of the excusewill be questioned based on the empirical results. Besides, the political factors ofinterest groups and election cycle make a non-ignorable effect on exchange ratemovement and they also are the proper motivations of America accusing China ofcurrency manipulation. At last, we comprehensively evaluate the currency accusationbehavior and provide the relevant policy proposal.