Third, the rate of currency appreciation has edged up.

It stimulates production (and hence employment), unlike overvaluation, which stimulates consumption.

The effect will be much the same as a currency appreciation.

An independent monetary policy requires a flexible exchange rate, not a revaluation.

Some resist appreciation actively and openly others do so in a less visible manner.

An undervalued currency enables an economy to integrate into the world economy on the basis of strong export performance. It stimulates production (and hence employment), unlike overvaluation, which stimulates consumption.

The result will be to raise the prices of China s exports and fuel demand for imports. The effect will be much the same as a currency appreciation.

Nothing can kill growth more effectively than an uncompetitive currency, and there is no faster route to currency appreciation than a surge in capital inflows.

The first round of Yuan revaluation won t be over until the currency is up against the dollar by at least 10 , and probably more.

Devaluation is not an option because of the common currency.

We raised the reward. We continued to increase the reward.

Other countries, like Norway and Switzerland, are running current account surpluses that exceed 10 of their GDP, but are resisting currency revaluation.

On the surface, at least, the mini revaluation hardly seems to have compromised China s ability to bend exchange markets to its will. Foreign experts had warned that a small Yuan appreciation might be worse than none.

If actual appreciation does not reduce China s trade surplus, pressure to appreciate the yuan further would only continue, as was true for Japan before 1995.

Currency undervaluation has become a substitute.

If appreciation does not reduce the current account surplus and capital inflows, then the renminbi s exchange rate is bound to face further upward pressure.

Using RMB appreciation as the primary tool to fight inflation implies accepting a temporarily higher unemployment rate now in exchange for a permanently lower unemployment rate in the future.

But there is a more fundamental issue the Chinese authorities, in arguing that it was a mistake to allow the yen to appreciate, may be misinterpreting what happened in Japan and thus overestimating the risk posed by currency appreciation.

Without domestic structural change, currency appreciation would not only undermine exports, but might also decrease imports, owing to higher unemployment and lower income.

On the contrary, accumulating reserves beyond a certain threshold carries a high opportunity cost and suggests the need to let the currency appreciate.

Currency undervaluation is such a potent instrument for growth for the simple reason that it creates incentives for the economy s growth promoting sectors.

Revaluation of its currency is necessary in part because the undervalued renminbi has become yet another a source of friction in Asia, as many in the region now believe the Chinese are using their currency as a policy weapon.

Currency undervaluation à la China will not go unnoticed.

In fact, capital inflows can make things worse, because they tend to appreciate the domestic currency and make production in export activities less profitable, further weakening the incentive to invest.

Upping the ante could turn the tables.

China interprets quantitative easing as a plot to devalue the dollar and force a revaluation of the renminbi.

Europeans are wrong to be angry with China because its currency peg to the US dollar has boosted the euro against most currencies on foreign exchange markets. On the contrary, they should view the currency peg as a valuable gift.

The lesson for countries that have not yet made the leap to financial globalization is clear beware.

That is why some people are advocating that China undertake a one shot, big bang appreciation large enough to defuse expectations of further strengthening and deter inflows of speculative hot money.

For 2013, the prize amount has been increased to 1 million.

This requires maintaining rapid growth while undertaking a major but necessarily gradual domestic restructuring, for which a smooth appreciation is much better suited.

With short term interest rates locked at zero, pressure for further appreciation would leave the PBC helpless to re expand the economy.

So it began to promote its industries through an undervalued currency instead.

A sizeable reduction in aggregate demand through RMB appreciation is achievable without being imprudent, because the current account surplus in 2007 was 9.5 of GDP.

Revaluation would accelerate this trend.

Revaluation of the Chinese yuan would also help.

When this pattern is combined with the depreciation of the new Israeli shekel (NIS) in 2003 and then its appreciation in 2004, it is clear that while the Palestinian trade balance does not benefit from the depreciation of the Israeli currency, it suffers the full negative impact of currency appreciation.

But, even with China s efforts to loosen the renminbi dollar linkage, it is arguable whether revaluation could save American jobs or improve the US trade balance.

On the contrary, they should view the currency peg as a valuable gift.

It was write offs and devaluations, not austerity programs, that allowed bond prices to recover.

Eurozone membership precludes inflation and devaluation as adjustment mechanisms.

President Miguel de la Madrid resorted to currency devaluations which in turn sparked inflation.

The won has been devalued sharply, making exports more viable.

Since the amount of foreign reserves available to defend a weak currency (a currency in low demand) is limited, a currency crisis or devaluation could be the end result.

With little sign of improved economic fundamentals, rapid currency appreciation is a potentially dangerous development for China in part owing to the risk of an abrupt and painful reversal.