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How Robust Are Estimates Of Equilibrium Real Exchange Rates: The Case Of China

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  • Steven Dunaway
  • Lamin Leigh
  • Xiangming Li

Abstract

. Assessments of a country's real exchange rate relative to its ‘equilibrium’ value as suggested by ‘fundamental’ determinants have received increasing attention. Using China as an example, the present paper illustrates models commonly used to derive equilibrium real exchange rate estimates. The large variance in the estimates raises serious questions about the robustness of these results. The basic conclusion is that, at least for China, small changes in model specifications, explanatory variable definitions, and time periods used in estimation can lead to very substantial differences in equilibrium real exchange rate estimates. Therefore, such estimates should be treated with great caution.

Suggested Citation

  • Steven Dunaway & Lamin Leigh & Xiangming Li, 2009. "How Robust Are Estimates Of Equilibrium Real Exchange Rates: The Case Of China," Pacific Economic Review, Wiley Blackwell, vol. 14(3), pages 361-375, August.
  • Handle: RePEc:bla:pacecr:v:14:y:2009:i:3:p:361-375
    DOI: 10.1111/j.1468-0106.2009.00455.x
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    File URL: https://doi.org/10.1111/j.1468-0106.2009.00455.x
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