Exchange Rate Policies Essay Example | Topics and Well Written Essays - 250 words

Exchange Rate Policies - Essay ExampleAbove balance of trade in favor of China says a lot about the comparative gain that China has in a considerable array of goods. Moreover, the pertinent point is that China has successfully tilted the advantage in its favor through and through a managed exchange respect regime. It is of no surprise that China has accumulated over $3trillion in its restrain through this comparative advantage in trade.A couple of years back, China had pegged its currency kwai at about 8.28/dollar and that remained at that level fairly for a long time. China transited to a managed float in 2005 but till date it has refrained from free floating Yuan. China does so because it does non want to see its currency appreciate against dollar. In doing so, China may lose the comparative advantage that it has gained across a wide range of goods.The U.S. is passing through a dire recession and unemployment rate continues to hover around 9 percent for last several quarters. There is no denying to the fact that the U.S. industries argon at great loss so far comparative advantage is concerned. That is why economists like Krugman (2011) potently advocates that a weak dollar is in the interest of U.S. to protect its producers. That is also a way to negociate the U.S. trade gap with China providing a level playing field to the U.S.