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China’s Peg and Inflation


I seldom post about macroeconomic topics, but since this is a hot topic with many of my students:

Because China ties it currency to the U.S. dollar, it could experience inflation, Bernanke said, noting that China’s currency has become more flexible lately.

“If the Fed lowers interest rates and stimulates the U.S. economy, that means also that essentially monetary policy becomes easier in China as well. Those low interest rates may not be appropriate for China,” Bernanke said. “China may experience inflation because it’s tied to U.S. monetary policy.”

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Categories: China
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