Beyond Cheap Talks: Assessing the Undervaluation of the Chinese Currency Between 1994 and 2007
AbstractRelying on new cointegration framework with structural breaks in the deterministic trend, this article employs the behavioral equilibrium exchange rate (BEER) approach to estimate the equilibrium real exchange rate of Renminbi (RMB) and exchange rate misalignment in China from 1994Q1 to 2007Q4. The main findings of the article are that RMB was overvalued during the Asian Financial crisis and during the period of 2001-2002. It was undervalued to a mild extent only during recent period from 2003 to 2005, except at the beginning of the sample; furthermore, slight overvaluations have appeared after the reform of exchange rate regime in 2005. Interpretations are given to shed some light on these movements.
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Bibliographic InfoArticle provided by CEPII research center in its journal Economie Internationale.
Volume (Year): (2009)
Issue (Month): 119 ()
Behavioral equilibrium exchange rate; renminbi; misalignment; cointegration; structural break;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
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- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
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- Dai, Meixing, 2012.
"In Search of an Optimal Strategy for Yuan’s Real Revaluation,"
41047, University Library of Munich, Germany.
- Meixing Dai, 2013. "In search of an optimal strategy for yuan’s real revaluation," Journal of Chinese Economic and Business Studies, Taylor and Francis Journals, vol. 11(1), pages 29-46, February.
- You, Kefei & Sarantis, Nicholas, 2012. "Structural breaks and the equilibrium real effective exchange rate of China: A NATREX approach," China Economic Review, Elsevier, vol. 23(4), pages 1146-1163.
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