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Behavior Equilibrium Exchange Rate and Misalignment of Renminbi: A Recent Empirical Study

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Jinzhao Chen

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Abstract

This paper employs the behavioral equilibrium exchange rate (BEER) model to estimate the equilibrium real exchange rate of Renminbi (RMB) and the exchange rate misalignment in China, which covers the period from 1994q1 to 2006q2. Using the most precise and recent data, the main findings of the paper are that (1) since 1994q1, RMB equilibrium exchange rate has exhibited a steady appreciation, but from the 1999q3 to the recent period, it started to depreciate. And (2) that RMB real exchange rate has been under-valuated during the most part of sample period, but this misalignment has a trend to become smaller and small, and in recent after-reform period, a small degree of over-evaluation replaces this under-valuation.

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File URL: http://www.degit.ifw-kiel.de/papers/degit_12/C012_013.pdf
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c012_013.

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Length: 21 pages
Date of creation: Jun 2007
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Handle: RePEc:deg:conpap:c012_013

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Related research
Keywords: Behavior equilibrium exchange rate; cointegration; misalignment; Renminbi;

Find related papers by JEL classification:
F31 - International Economics - - International Finance - - - Foreign Exchange
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
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

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Clostermann, Jörg & Schnatz, Bernd, 2000. "The determinants of the euro-dollar exchange rate : synthetic fundamentals and a non-existing currency," Discussion Paper Series 1: Economic Studies 2000,02, Deutsche Bundesbank, Research Centre. [Downloadable!]
  2. Dominique Desruelle & Alessandro Zanello, 1997. "A Primer on the IMF's Information Notice System," IMF Working Papers 97/71, International Monetary Fund.
  3. Ronald MacDonald, 1997. "What Determines Real Exchange Rates? The Long and Short of It," IMF Working Papers 97/21, International Monetary Fund.
  4. Morris Goldstein, 2004. "Adjusting China's Exchange Rate Policies," Peterson Institute Working Paper Series WP04-1, Peterson Institute for International Economics. [Downloadable!]
  5. Zhang, Zhichao, 2001. "Real Exchange Rate Misalignment in China: An Empirical Investigation," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 80-94, March. [Downloadable!] (restricted)
  6. Peter B. Clark & Ronald MacDonald, 1998. "Exchange Rates and Economic Fundamentals - A Methodological Comparison of BEERs and FEERs," IMF Working Papers 98/67, International Monetary Fund.
  7. Baffes, John & Elbadawi, Ibrahim A. & O'Connell, Stephen A., 1997. "Single-equation estimation of the equilibrium real exchange rate," Policy Research Working Paper Series 1800, The World Bank. [Downloadable!]
  8. Philip Lane & Gian Maria Milesi-Ferretti, 2001. "THE EXTERNAL WEALTH OF NATIONS: Measures of Foreign Assets and Liabilities For Industrial and Developing Countries," CEG Working Papers 20012, Trinity College Dublin, Department of Economics. [Downloadable!]
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  9. Michael Funke & Jörg Rahn, 2005. "Just how Undervalued is the Chinese Renminbi," Quantitative Macroeconomics Working Papers 20504, Hamburg University, Department of Economics. [Downloadable!]
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  10. Coudert, Virginie & Couharde, Cecile, 2007. "Real equilibrium exchange rate in China is the renminbi undervalued?," Journal of Asian Economics, Elsevier, vol. 18(4), pages 568-594, August. [Downloadable!] (restricted)
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