China’s Forex Follies
China 2% devaluation of its currency last month was no earth-shattering event, but financial markets responded as if a meteorite had struck them. The negative reaction is no mystery: China’s devaluation was a textbook example of how not to conduct exchange-rate policy.
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BERKELEY – On August 11, China devalued its currency by 2% and modestly reformed its exchange-rate system. This was no earth-shattering event, but financial markets responded as if a meteorite had struck them. The negative reaction is no mystery: China’s devaluation was a textbook example of how not to conduct exchange-rate policy.