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Just how undervalued is the Chinese renminbi?

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Author Info
Funke, Michael () (Hamburg University)
Rahn, Jörg () (Hamburg University)

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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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Publisher Info
Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 14/2004.

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Length: 40 pages
Date of creation: 07 Jul 2004
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Publication status: Published in The World Economy, 2005, pages 465-489.
Handle: RePEc:hhs:bofitp:2004_014

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Keywords: Renminbi Yuan China Exchange Rate Equilibrium Exchange Rate

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
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

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.:

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    Other versions:
Full references

Cited by:
(explanations, 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. Eswar Prasad & Shang-Jin Wei, 2005. "The Chinese Approach to Capital Inflows: Patterns and Possible Explanations," NBER Working Papers 11306, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Colavecchio , Roberta & Funke, Michael, 2006. "Volatility transmissions between renminbi and Asia-Pacific on-shore and off-shore U.S. dollar futures," BOFIT Discussion Papers 16/2006, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  3. Olivier Darné & Jean-François Hoarau, 2006. "Testing the purchasing power parity in China," EconomiX Working Papers 2006-18, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  4. Jinzao Chen, 2007. "Behavior Equilibrium Exchange Rate and Misalignment of Renminbi: A Recent Empirical Study," DEGIT Conference Papers c012_013, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  5. Matei Demetrescu & Helmut Luetkepohl & Pentti Saikkonen, 2008. "Testing for the Cointegrating Rank of a Vector Autoregressive Process with Uncertain Deterministic Trend Term," Economics Working Papers ECO2008/24, European University Institute. [Downloadable!]
  6. Antoine Bouveret & Sana Mestiri & Henri Sterdyniak, 2006. "The renminbi equilibrium exchange rate: an agnostic view," Documents de Travail de l'OFCE 2006-13, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
  7. Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2007. "The Overvaluation of Renminbi Undervaluation," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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  8. James Laurenceson & Kam Ki Tang, . "China’s Equilibrium Exchange Rate and Trade Balance: A Tale of Apples and Pirates," EAERG Discussion Paper Series 0805, School of Economics, University of Queensland, Australia. [Downloadable!]
  9. Funke, Michael & Gronwald, Marc, 2007. "The Undisclosed Renminbi Basket: Are The Markets Telling Us Something About Where The Renminbi - US Dollar Exchange Rate Is Going?," BOFIT Discussion Papers 20/2007, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  10. Willenbockel, Dirk, 2006. "Structural Effects of a Real Exchange Rate Revaluation in China: A CGE Assessment," MPRA Paper 920, University Library of Munich, Germany. [Downloadable!]
  11. Funke, Michael & Rahn, Jörg, 2004. "Just how undervalued is the Chinese renminbi?," BOFIT Discussion Papers 14/2004, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
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