The Debt-adjusted Real Exchange Rate for China
AbstractThe paper aims to enrich the debate on the overvaluation/undervaluation of China yuan Renminbi (CNY) against USD and JPY by applying the concept of the Debt-Adjusted Real Exchange Rate (DARER). This approach is offering to monetary policy makers another indicator for more responsive management of this important economic variable. The general motivation for constructing DARER is the fact that long-term current account surplus (deficits) is linked with capital outflows (inflows), which often leads to real undervaluation (overvaluation) of domestic currency. DARER can signal to the authorities that the real exchange rate is becoming unsustainable in the medium term. Based on the DARER approach we also introduce three indicators of exchange rate misalignment.
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Bibliographic InfoPaper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 850.
Length: 16 pages
Date of creation: 2008
Date of revision:
Exchange rate ; current account ; misalignment ; China ; DARER;
Find related papers by JEL classification:
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-15 (All new papers)
- NEP-CBA-2008-04-15 (Central Banking)
- NEP-CNA-2008-04-15 (China)
- NEP-IFN-2008-04-15 (International Finance)
- NEP-MAC-2008-04-15 (Macroeconomics)
- NEP-MON-2008-04-15 (Monetary Economics)
- NEP-OPM-2008-04-15 (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.:
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