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Just how Undervalued is the Chinese Renminbi

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  • Michael Funke

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  • Jörg Rahn

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Abstract

Given that the value of China´s currency has been hot topic recently, this paper explores the equilibrium levels of China´s real and nominal exchange rates. Employing a Johansen cointegration framework, we focus on the behavioral equilibrium exchange rate (BEER) and permanent equilibrium exchange rate (PEER) models. Our results suggest that, while the renminbi is somewhat undervalued against the dollar, the misalignment is not nearly as exaggerated as many popular claims.

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Paper provided by Hamburg University, Department of Economics in its series Quantitative Macroeconomics Working Papers with number 20504.

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Date of creation: Apr 2005
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Handle: RePEc:ham:qmwops:20504

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