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The evolving renminbi regime and implications for Asian currency stability

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  • Guonan Ma
  • Robert McCauley

Abstract

The Chinese authorities described the management of the renminbi after its 2005 unpegging from the US dollar as involving a basket of trading partner currencies. Outside analysts have detected few signs of such management. We find that, in the two years from mid-2006 to mid-2008, the renminbi strengthened gradually against trading partners' currencies within a narrow band. In mid-2008, the financial crisis interrupted this experiment and the bilateral renminbi/dollar exchange rate stabilised at 6.8. The 2006-08 experience suggests that a shared policy of gradual nominal effective appreciation renders East Asian currencies quite stable against one another. Such a shared policy would create favourable conditions for regional monetary cooperation.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 321.

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Length: 22 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:bis:biswps:321

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Keywords: exchange rate regime; renminbi; effective exchange rate; regional currency stability; regional monetary cooperation;

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References

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Citations

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Cited by:
  1. Glick, Reuven & Hutchison, Michael, 2013. "China's financial linkages with Asia and the global financial crisis," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 186-206.
  2. Subramanian Arvind & Kessler Martin, 2013. "The Renminbi Bloc is Here: Asia Down, Rest of the World to Go?," Journal of Globalization and Development, De Gruyter, vol. 4(1), pages 49-94, August.
  3. Yin‐Wong Cheung & Guonan Ma & Robert N. McCauley, 2011. "Renminbising China'S Foreign Assets," Pacific Economic Review, Wiley Blackwell, vol. 16(1), pages 1-17, 02.
  4. Willem Thorbecke, 2011. "Transpacific Imbalances and Macroeconomic Codependency," Macroeconomics Working Papers 23237, East Asian Bureau of Economic Research.
  5. Ronald A. Ratti & Joaquin L. Vespignani, 2014. "Not all international monetary shocks are alike for the Japanese economy," CAMA Working Papers 2014-14, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  6. Benjamin Keddad, 2013. "Assessing Asian Exchange Rates Coordination under Regional Currency Basket System," Working Papers halshs-00862254, HAL.
  7. Andrew Filardo & Guonan Ma & Dubravko Mihaljek, 2011. "Exchange rate and monetary policy frameworks in EMEs," BIS Papers chapters, in: Bank for International Settlements (ed.), Capital flows, commodity price movements and foreign exchange intervention, volume 57, pages 37-63 Bank for International Settlements.
  8. Benjamin Keddad, 2013. "Exchange rate coordination in Asia under regional currency basket systems," Economics Bulletin, AccessEcon, vol. 33(4), pages 2913-2929.
  9. Liu, Lin & Chang, Hsu-Ling & Su, Chi-Wei & Jiang, Chun, 2013. "Real interest rate parity in East Asian countries based on China with flexible Fourier stationary test," Japan and the World Economy, Elsevier, vol. 25, pages 52-58.
  10. Fratzscher, Marcel & Mehl, Arnaud, 2011. "China’s Dominance Hypothesis and the Emergence of a Tri-polar Global Currency System," CEPR Discussion Papers 8671, C.E.P.R. Discussion Papers.
  11. Guonan Ma & Robert McCauley & Lillie Lam, 2013. "The Roles of Saving, Investment and the Renminbi in Rebalancing the Chinese Economy," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 72-84, 02.

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