Exchange Rate Policy and Global Supply Chains: The Case of the Chinese Renminbi and Global Soybean and Soybean Product Markets

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A policy debate on widespread currency manipulation has generated economic analyses to inform policymakers regarding both the extent and impact of the problem. Such analyses typically focus on commodity trade and price impacts while ignoring potentially important supply chain linkages. Using Chinese exchange rate policy and global soybean and soybean product markets as an example, this paper illustrates that substantial measurement errors are possible if supply chain linkages are ignored in exchange rate policy analyses. As a consequence, policy responses to foreign currency manipulation informed by such analyses may be misguided or imprecise at best.

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