QUESTION 13.7 13.7A A nation might try to achieve three main policy objectives: monetary policy independence, a fxed exchange rate, and international capital mobility. What are the merits of each of these objectives? Why are they desirable?

13.7B Since the year 2000, US policymakers have grown concerned about the exchange rate between the US dollar and the Chinese yuan. Effectively, the yuan was fxed to the dollar at a rate they considered to be inappropriate. Moreover, China was able to maintain some monetary independence. What does this imply for capital mobility?

13.7C The buoyant growth of the Chinese economy in the 21st century has attracted a lot of capital to China. Given that capital restrictions are hard to enforce perfectly, Chinese money growth has been rapid. What does this imply for monetary policy independence?
13.7D As the Chinese economy integrates ever more tightly into the global economic system, capital restrictions will become ever harder to enforce. What policy options do the Chinese monetary authorities have in light of this development?