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Retrospect of the Chinese Exchange Rate Regime after Reform: Stylized Facts during the Period from 2005 to 2010

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  • Jie Sun

Abstract

In the present paper, we estimate the de facto RMB exchange rate regime, the currency basket, the floating band and the foreign exchange market pressure before and after the reform of the Chinese exchange rate regime in 2005. We find the following stylized facts: the value of the RMB became stable after the reform; the weight of the US dollar remained high in the basket, while other currencies remained statistically significant; and the floating band gradually increased to 10 percent during 2005-2008, and then greatly narrowed from the late summer of 2008 under the assumption of a yearly resetting interval. We find that the foreign exchange market pressure increased from 2005 to 2008. A possible reason is that the weight of the US dollar in the basket was slightly lower than the share of the US dollar in total transactions on the Chinese foreign exchange market. Therefore, it is reasonable for China to adopt a dollar peg exchange rate regime. Copyright (c) 2010 The Author China & World Economy (c) 2010 Institute of World Economics and Politics, Chinese Academy of Social Sciences.

Suggested Citation

  • Jie Sun, 2010. "Retrospect of the Chinese Exchange Rate Regime after Reform: Stylized Facts during the Period from 2005 to 2010," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(6), pages 19-35.
  • Handle: RePEc:bla:chinae:v:18:y:2010:i:6:p:19-35
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    References listed on IDEAS

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    1. Prema-chandra Athukorala & Jayant Menon, 2010. "Global Production Sharing, Trade Patterns and Determinants of Trade Flows," Departmental Working Papers 2010-06, The Australian National University, Arndt-Corden Department of Economics.
    2. Athukorala, Prema–Chandra & Menon, Jayant, 2010. "Global Production Sharing, Trade Patterns, and Determinants of Trade Flows in East Asia," Working Papers on Regional Economic Integration 41, Asian Development Bank.
    3. Hal Hill & Jayant Menon, 2011. "Reducing Vulnerability in Transition Economies: Crises and Adjustment in Cambodia," Departmental Working Papers 2011-08, The Australian National University, Arndt-Corden Department of Economics.
    4. Prema-chandra Athukorala, 2011. "Production Networks and Trade Patterns in East Asia: Regionalization or Globalization?," Asian Economic Papers, MIT Press, vol. 10(1), pages 65-95, Winter/Sp.
    5. Shiro Armstrong, 2010. "Taiwan's Asia Pacific Economic Strategies Post-ECFA," EABER Working Papers 22810, East Asian Bureau of Economic Research.
    6. Prema-chandra Athukorala, 2009. "Production Networks and Trade Patterns:East Asia in a Global Context," Departmental Working Papers 2009-15, The Australian National University, Arndt-Corden Department of Economics.
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    Cited by:

    1. Tian, Lei & Chen, Langnan, 2013. "A reinvestigation of the new RMB exchange rate regime," China Economic Review, Elsevier, vol. 24(C), pages 16-25.
    2. Yin-Wong Cheung & Cho-Hoi Hui & Andrew Tsang, 2017. "The RMB Central Parity Formation Mechanism after August 2015: A Statistical Analysis," Working Papers 062017, Hong Kong Institute for Monetary Research.
    3. Yin-Wong Cheung & Cho-Hoi Hui & Andrew Tsang, 2016. "The Renminbi Central Parity: An Empirical Investigation," CESifo Working Paper Series 5963, CESifo Group Munich.
    4. Dai, Meixing, 2011. "Motivations and strategies for a real revaluation of the Yuan," MPRA Paper 30440, University Library of Munich, Germany.
    5. Tsuchiya, Yoichi, 2016. "Asymmetric loss and rationality of Chinese renminbi forecasts: An implication for the trade between China and the US," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 44(C), pages 116-127.

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