Term Paper Assignment

Topic: The Yuan [YUAN]

The Chinese exchange rate (called the "Yuan", or sometimes the "Renminbi") has been a contentious issue over the past several years, especially against the context of a wide bilateral trade deficit with the US. However, over the past year, the Chinese trade balance has shrunk considerably as a share of Chinese GDP, Chinese reserves have declined, and financial capital outflows have increased. (Memo structure and the things should be discussed in the paper are listed below.)

The term paper assignment requires the submission of a double space 15-page paper. It might be helpful in structuring this paper to pretend that you are a senior economist at the U.S. Treasury Department andyou are writing this as a memo to the Assistant Secretary of Treasury for International Affairs (or equivalent) to give him/her background on the topic.

The memo should be structured as follows:

1. Brief introduction and current situation
2. Analysis
3. Policy options (with analysis of likely outcomes) and recommendations

The memo should also incorporate informational graphs (with data) and tables if useful. Analytical graphs (such as supply and demand figures) are not typically used in memos. Since it is not usually standard practice to "cut and paste" tables and graphs from other documents into official memos, you should strive to generate your own graphs and tables. Data sources are located on the course website (including FRED), as well as on campus (Data and Information Services Center in the Social Sciences Building.

In addition, follow the usually conventions: include page numbers, label sources for tables and graphs, and list references. You should feel free to consult certain weblogs (Econ browser, WSJ Real Time Economics, CBO Blog, Economists View blog), to get ideas and links to documents, but do not cite weblog posts as references. Also, do not cite lecture notes.

The evaluation of the paper will be based upon the following:

1. How well is the paper organized, and how clear it is in terms of exposition.
2. How well the situation is summarized (including the use of statistics and graphs).
3. How well models are used to analyze the situation.
4. How well your policy recommendations fit in with the analysis you present.

Topic : The Yuan [YUAN]

The Chinese exchange rate (called the "Yuan", or sometimes the "Renminbi") has been a contentiousissue over the past several years, especially against the context of a wide bilateral trade deficit with theUS. However, over the past year, the Chinese trade balance has shrunk considerably as a share of ChineseGDP, Chinese reserves have declined, and financial capital outflows have increased.

In your memo, you should discuss the following issues:

1. The effect of the current value, and trajectory, of the Yuan on the US and world economies.

2. The theoretical arguments for changes to the Chinese exchange rate regime, including accelerated devaluation and/or allowing a free float, given the current state of the Chinese economy.

3. The implications for the US economy of such changes. What will happen to the value of the dollar against the Yuan if China goes on a free float? What would be the implications for the ability of the U.S. government to borrow?

4. The possible consequences for the Chinese economy, and the other economies in the region (Japan, Korea, Thailand).