Domestic Politics and the Credibility of U.S. Pressure over China’s Currency "Manipulation"
Department:China and the World Program
Audience:Open to the Public
How do domestic political pressures affect international monetary relations? Trade deficits often give rise to accusations of “currency manipulation” and legislative efforts to remedy these purported imbalances and unfair practices. This paper investigates the credibility of these coercive pressures and threats in the context of US-China relations and Chinese responses to US signals concerning the revaluation of the RMB. We argue that elections concentrate the attention of both the legislative and executive branch on normally diffuse concerns of the mass public about foreign economic competition. Analyzing several thousand statements and actions by US executive and legislative officials, we find legislative and executive signals often conflict and undermine the credibility of US pressure. However, we find that executive-legislative unanimity, particularly during election season, sends a strong signal of US resolve. Our quantitative and qualitative results show that political pressures can under certain conditions have an effect on exchange rate decisions.
Jessica Chen Weiss is an assistant professor of political science at Yale University. Starting in July 2015, she will join the department of government at Cornell University as an associate professor. She studies the role of domestic politics in foreign policy and international relations, with a focus on popular sentiment and nationalist protest in China and the Asia-Pacific.