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Verifying China's exchange rate regime: it is a discretionary crawling peg to the US dollar!

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  • Jyh-Dean Hwang

Abstract

This paper investigates the evolution of China's exchange rate regime after the announced shift to a managed floating exchange rate regime with reference to a basket of currencies in July 2005. We find that the RMB basket is essentially a one currency basket of the US dollar. In view of this finding and that the exchange rate of RMB against the US dollar has been crawling upward in an on-and-off manner and at a slow yet erratic rate after the regime shift, China's current exchange rate regime can best be characterised as a discretionary crawling peg to the US dollar. We suggest that a discretionary crawling peg to the US dollar is the optimal and logical choice for China and it will probably be quite some time before China moves to a freely floating exchange rate regime or only to a managed floating exchange rate regime in the real sense.

Suggested Citation

  • Jyh-Dean Hwang, 2014. "Verifying China's exchange rate regime: it is a discretionary crawling peg to the US dollar!," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 7(3), pages 250-270.
    • Handle: RePEc:ids:ijtrgm:v:7:y:2014:i:3:p:250-270
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    Cited by:

    1. Mohamed Bouabidi, 2022. "The Tunisian exchange rate regime: Is it really floating?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4684-4704, October.

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