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Just how undervalued is the Chinese renminbi

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  • Funke, Michael
  • Rahn, Jörg

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.

Suggested Citation

  • Funke, Michael & Rahn, Jörg, 2004. "Just how undervalued is the Chinese renminbi," BOFIT Discussion Papers 14/2004, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2004_014
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    More about this item

    Keywords

    Renminbi; Yuan; China; Exchange Rate; Equilibrium Exchange Rate;
    All these keywords.

    JEL classification:

    • 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
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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