RMB Undervaluation and Appreciation
AbstractThe bilateral real exchange rate between Chinese renminbi (RMB) and the US dollar is studied. The panel data Penn effect model shows that the RMB was overvalued in 1980–1991 but later undervalued in 1992–2010. In 2010, it was undervalued by 36.7%. Econometric analysis and an examination of the appreciation of seventeen currencies belonging to countries and areas under the same economic development stage show that the RMB should appreciate at an annual speed of 3.2%. At this rate, the RMB misalignment in 2010 will be corrected by 2020. In the future, RMB appreciation should be realized totally from the nominal exchange rate, not partly from the nominal exchange rate and partly from the relative price level. This appreciation path satisfies the interests of both China and the US.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 40978.
Date of creation: 27 May 2012
Date of revision:
Chinese renminbi; Real exchange rate; Penn effect; Undervaluation; Appreciation;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-09 (All new papers)
- NEP-MON-2012-09-09 (Monetary Economics)
- NEP-OPM-2012-09-09 (Open Economy Macroeconomic)
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.:
- Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2007.
"The Overvaluation of Renminbi Undervaluation,"
NBER Working Papers
12850, National Bureau of Economic Research, Inc.
- Yin-wong Cheung & Menzie D. Chinn & Eiji Fujii, 2007. "The Overvaluation of Renminbi Undervaluation," Working Papers 112007, Hong Kong Institute for Monetary Research.
- Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2007. "The Overvaluation of Renminbi Undervaluation," CESifo Working Paper Series 1918, CESifo Group Munich.
- XU, Yingfeng, 2009. "Relevant international experience of real exchange rate adjustment for China," China Economic Review, Elsevier, vol. 20(3), pages 440-451, September.
- Chang, Gene Hsin & Shao, Qin, 2004. "How much is the Chinese currency undervalued? A quantitative estimation," China Economic Review, Elsevier, vol. 15(3), pages 366-371.
- Zhang, Jian & Fung, Hung-Gay, 2006. "Winners and losers: Assessing the impact of Chinese Yuan appreciation," Journal of Policy Modeling, Elsevier, vol. 28(9), pages 995-1009, December.
- Frenkel, Roberto & Ros, Jaime, 2006. "Unemployment and the real exchange rate in Latin America," World Development, Elsevier, vol. 34(4), pages 631-646, April.
- Barry, Eichengreen, 2011. "The renminbi as an international currency," Journal of Policy Modeling, Elsevier, vol. 33(5), pages 723-730, September.
- William R. Cline & John Williamson, 2011. "The Current Currency Situation," Policy Briefs PB11-18, Peterson Institute for International Economics.
- Zhang, Yin & Wan, Guanghua, 2008. "Correcting China's trade imbalance: Monetary means will not suffice," Journal of Policy Modeling, Elsevier, vol. 30(3), pages 505-521.
- Wang, Yajie & Hui, Xiaofeng & Soofi, Abdol S., 2007. "Estimating renminbi (RMB) equilibrium exchange rate," Journal of Policy Modeling, Elsevier, vol. 29(3), pages 417-429.
- Peter Isard, 2007. "Equilibrium Exchange Rates: Assessment Methodologies," IMF Working Papers 07/296, International Monetary Fund.
- Zhang, Zhibai & Chen, Langnan, 2013. "A New Assessment of the Chinese RMB Exchange Rate," MPRA Paper 49315, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.