Chinese Currency Devaluation and the Economic Implications for Nigeria
DOI:
https://doi.org/10.6000/1929-7092.2018.07.86Keywords:
Trade politics, Currency war, External shocks, Economy.Abstract
The decision of Chinese government to devalue the Yuan has attracted serious condemnation by majorly developed economies, despite the government position that the devaluation was aimed at aligning the Yuan with the market rate. The general argument is anchored on the notion that the devaluation was a strategy to increase China's share of global trade by making its goods cheaper in the international market. This thinking is influenced by the long standing Mundell–Fleming model, which aligned with the theory that competitive devaluation is detrimental to the world economy, because of beggar-thy-neighbour welfare effect. The situation is compelling other countries to respond by improving their balance of trade in response to China tactics. The inability of developing economies to respond to this global trade war could be attributed to factors such as colonialism, presence of agency of restraints, complementarity among developing countries, and other institutional rigidities such as technological deficiency, infrastructure deficit, and commodity based exports, among others. Chinese currency devaluation has impacted meaningfully on the Nigeria economy given the fact that Nigeria maintains strong economic ties with China. The paper argues that for developing economies to effectively respond to competitive devaluation, they must close their borders to certain goods, improve infrastructure, prioritize technological transfer, embrace value-added production, and eliminate institution rigidities that hinder the ease of doing business.
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Alan, W. (2015). What China's currency devaluation means for the world's trade deals. August 19, fortune publications. [Online] Available: http://www.fortune.com [13 April 2017].
Alemu, A, Mengistu & Jin-sang, L. (2014). Examining the Effects of Currency Depreciation on Trade Balance in Selected Asian”. Economies International Journal of Global Business, 7 (1): 59-76.
Chandrasekhar, C.P. (2010). Global imbalances and the Dollar’s future. Economic and political weekly, 45 (23): 33-54.
Charan, S. (2015). As China Devalues, India Must Protect Itself From a Currency War It Cannot Win. The Wire publication [Online] Available: http://www.theWIRE.com [02 March 2017].
Cunado, J & Perez de Gracia, F ( 2005). Oil prices, economic activity and inflation: evidence for some Asian countries. The Quarterly Review of Economics and Finance, 45(1): 65-83.
https://doi.org/10.1016/j.qref.2004.02.003
Djeri-wake, N. (2009). Impact of Chinese investment and trade on Nigeria economic growth. African Trade Policy Center (ATPC) Working Paper, Economic Commission for Africa, pp.1-38.
Dobre, C. (2008). The Relation between Openness to trade and Economic Growth. Central and Eastern European Online Library. [Online] Avaliable: http://wwww.ceeol.com [6 June 2016].
Essandoh-Yeddu, J. & Yalamova, R. (2014). Current drop in oil prices: impact on Africa” International Association for Energy Economics. [Online] Available: https://www.iaee.org/en/ publications/newsletterdl.aspx?id=312 [01 October 2016]
Eicherngreen, B & Temin, P. (1997). The Gold Standard and the Great Depression” NBER working Paper Series. NBER Program the National Beaureu of economic research.
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Irwin, N. (2016). Why Did China Devalue Its Currency? Two Big Reasons. New York: The New York Times. [Online] Avaliable: http://mobile.nytimes.com [10 June 2016].
Inman, P. (2015). Why has China devalued its currency and what impact will it have? Economies Correspondent, Tuesday 11th August. International edition of the guardian. [Online] Available: https://www.theguardian.com/business/2015/aug/11/china-devalues-yuan-against-us-dollar-explainer.
Khan M.S. & Knight, M. (1981).Stabilization Programs in Developing Countries: A Formal Framework.”IMF Staff Papers28 (March 1981): 1-53. Finn Tarp-Business & Economics. [Online] Available: https://books.google.com.ng/books?isbn= 1134891989 [14 January 2016].
Krugman, P. (1984). The international role of Dollar Theory and Prospect. [Online] Available: http://www.nber.org//c6838 [05 July 2016].
Lardy, N. (2001). “Foreign Trade and economic reform in China.” The china quarterly NBER working paper series China’s embrace of globalization. Massachusetts Avenue Cambridge: National bureau of economic research 1050. [Online] Available: http://www.nber.org/papers/w12373 [12 March 2016].
Li, A. (2015). Tumbled Stock Market, RMB Devaluation and Financial Reform in China. China Perspectives Shaping the Chinese Intent, pp. 1-7.
Juha, T & Philip, E .(2010). Beggar-Thyself or Beggar-Thy Neighbour? The Welfare Effects of Monetary policy. School of Business and Economics Discussion paper.
Kenen, P. (1983). The Role of Dollar as an International Currency. New York: Group of occasional papers 13.
Marc, A. & Michele, R. (2011). Currencies and trade: looking at the recent literature. World Trade Organization. ECONSTOR [Online] Available: https://www.econstor.eu/bitstream [12 June 2015].
McKinnon, R. (2011). Beggar-Thy-Neighbour Interest Rate Policies. Journal of Policy Modelling, (33):759-775.
https://doi.org/10.1016/j.jpolmod.2011.07.008
Mustafa, A. (2000). Devaluation in Developing Countries: Expansionary or Contractionary? Journal of Economics and Social Research 2(1):59-83.
Neil, I. (2015). Why Did China Devalue Its Currency? Two Big Reasons. New York: The New York Times. [Online] Available: http://.mobile.nytimes.com [10 April 2017].
Nick, E. (2015). China Cuts Interest Rates in Bid to Halt Stock Turmoil and Reassure Markets after ‘Black Monday’. South China Morning Post, 25 August 1.
Porter, M. (1990). What Is National Competitiveness?” onlinelibrary.wiley. March–April 1990 Issue. [Online] Available: http://onlinelibrary.wiley.com/doi/10.1002/ cir.3880010112 [10 July 2016].
Rawlins, G. & Praveen, J. (2000). Devaluation and the Trade Balance: The Recent Experiences of Selected African Countries, Centre for Economic Research on Africa, School of Business, Montclair State University, New Jersey, USA.
Ritesh, A. (2015). It could be better. Zimbabwe: Zimbabwe Independence. [Online] Available: . www.proactiveinvestors.co.uk/.../cambria_africa_plc___diversified_growth_play_in_ [03 October, 2016].
Urama K. (2015). Chinese Currency Devaluation: Potential Implications for African Economies”. The Guardian, China, Tuesday 11 August 1.
Utomi, P (2007). China and Nigeria. [Online] Available: http://csis.org/files/media.prod.s3.amazonaws.com/s3fspublic/legacy_files/files/media/csis/pubs/080603_utomi_nigeriachina [15 October 2015].
Samina, S & Reema, K (2007). Economic Effects of the Recently Signed Pak-China Free Trade Agreement. The Lahore Journal of Economics Special Edition (September ) pp. 1-30.
Sahil, A. (2015). Currency crashes in emerging markets: An empirical treatment. Journal of Financial Management and Economics, 41, 351– 366. .
UNCTAD least development countries report (2005). Escaping the poverty Trap. United Nations Conference on Trade and Development. [Online] Available: http://unctad.org/en/pages/ PublicationArchive.aspx?publicationid=121
World Bank Global Monitoring Report (2004). Policies and Actions for Achieving the Millennium Development goals and Related Outcomes. Washington D.C: International Bank for Reconstruction and Development.
Zeeshan, K. Asghar, A & Ali, S. (2016). Impact of Devaluation on Balance of Trade: A Case Study of Pakistan Economy. Asian Journal of Economy Modelling, 4(2):90-94.
https://doi.org/10.18488/journal.8/2016.4.2/8.2.90.94
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Published
2018-12-05
How to Cite
Okoyeuzu, C. R., Igwe, A., & Ukpere, W. I. (2018). Chinese Currency Devaluation and the Economic Implications for Nigeria. Journal of Reviews on Global Economics, 7, 882–889. https://doi.org/10.6000/1929-7092.2018.07.86
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