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- Big rise in yuan unlikely: Nobel laureate
Date: 26-Oct-2007 Sources: (Shenzhen Daily)
ROBERT MUNDELL, a Nobel Prize-winning economist, said Thursday the accelerated appreciation in China's currency called for by some economists and policymakers is based on bad theory and bad politics.
'China will go on doing just what it's doing,'' Mundell, an economics professor at Columbia University in New York, said. 'The only way you could force it to happen is if the United States decided to intervene and appreciate the Chinese currency by buying it. But they're not going to do it.''
The yuan has advanced 10.5 percent since the government scrapped a peg to the U.S. dollar in July 2005, gains that U.S. officials say are insufficient to reduce a trade surplus that swelled to US$23.9 billion in September.
Barry Eichengreen, an economics professor at the University of California, Berkeley, said Wednesday that the dollar has to fall by about another 20 percent to shrink the U.S. external deficit to sustainable levels.
Mundell said the prescription for a big revaluation in the yuan is 'just nonsense.''
'It's bad theory and it's bad empirics and it's bad politics,'' said the Nobel laureate, whose research helped lay the foundation for Europe's single currency.
Mundell said it would be a 'terrible move'' for China to allow its currency to appreciate too rapidly. 'There would be a devastating impact on the rural parts of China,'' Mundell said.
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