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Measuring Renminbi Misalignment: Where Do We Stand?

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Author Info

  • Yin-Wong Cheung

    (University of California, Santa Cruz and Hong Kong Institute for Monetary Research)

  • Menzie D. Chinn

    (University of Wisconsin, Madison)

  • Eiji Fujii

    (Kwansei Gakuin University)

Abstract

The value of China's currency, the renminbi (RMB), and the conduct of China's exchange rate policy have generated intense debate in academic and international policy circles. Despite the accumulation of empirical evidence regarding the degree of RMB misalignment over the past few years, the debate continues unabated. In this study, we highlight the challenges to properly assessing the nature and degree of currency misalignment, in terms of the choice of the model, the method of calculation, and data uncertainty. In particular, we demonstrate the susceptibility of misalignment estimates to model selection and data revisions. Further, we explicitly discuss the implications of sampling uncertainty for determining the extent of RMB misalignment.

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Bibliographic Info

Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 242010.

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Length: 31 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:hkm:wpaper:242010

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Related research

Keywords: Absolute Purchasing Power Parity; China; Currency Misalignment; Sampling Uncertainty; Data Revision;

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References

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Cited by:
  1. Yin-Wong Cheung, 2012. "Exchange Rate Misalignment - The Case of the Chinese Renminbi," CESifo Working Paper Series 3797, CESifo Group Munich.
  2. Yin-Wong Cheung & Eiji Fujii, 2011. "Exchange Rate Misalingment Estimates - Sources of Differences," CESifo Working Paper Series 3555, CESifo Group Munich.

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