Suppose the Chinese economy recovers more quickly than the US economy from our current global recession. Illustrate
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Question:
- Suppose the Chinese economy recovers more quickly than the US economy from our current global recession. Illustrate and describe how this asymmetric recovery across countries will impact our simultaneous equilibrium model from the perspective of the US. Be sure to highlight the changes in the rate of return on $-denominated assets, the rate of return on yuan (CNY)-denominated assets and the exchange rate ($/CNY).
- Since the beginning of 2021, the dollar has been steadily appreciating in value relative to the Japanese Yen.
a) How would this impact the competitiveness of US automotive firm General Motors competing with Japanese automotive firm Toyota in global markets?
b) How would the Bank of Japan implementing expansionary monetary policy impact the competitiveness of Toyota? How do you know?
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