China's Growth, Stability, and Use of International Reserves
Since the onset of the global financial crisis, China and the U.S. have reduced their current-account imbalances as a share of GDP to less than half their pre-crisis levels. For China, the reduction in its current-account surplus post-crisis suggests a structural change. Panel regressions for a sample of almost 100 countries over 1983-2013 confirm that the relationship between current-account balances and economic variables changed in important ways after the financial crisis. China's rebalancing has been accompanied by a decline in its reserves-to-GDP ratio and greater outward FDI that, in turn, has mitigated reserve hoarding.
Useful comments by George Tavlas, Jaejoon Woo, and the participants at the 2014 Philadelphia AEA meeting are gratefully acknowledged. Any errors are ours. Joshua Aizenman is grateful for the support provided by the Dockson Chair in Economics and International Relations, USC. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Joshua Aizenman & Yothin Jinjarak & Nancy Marion, 2014. "Chinaâs Growth, Stability, and Use of International Reserves," Open Economies Review, Springer, vol. 25(3), pages 407-428, July. citation courtesy of