Exchange Rate Determinants of the US Dollar and Chinese RMB: a Classical Political Economics Approach

This paper contributes to the literature on determining real exchange rates by developing a model that is based key propositions of classical political economy within which competition governs domestic and international trade, labor theory value underneath prices and, under these conditions, principle absolute cost advantage shapes trade. The econometric analysis shows relative unit regulator long-run behavior in both, China USA, for period 1982-2018.