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The Undisclosed Renminbi Basket: Are the Markets Telling Us Something about Where the Renminbi-US Dollar Exchange Rate is Going?

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  • Michael Funke
  • Marc Gronwald

Abstract

On 21 July 2005 China adopted an undisclosed basket exchange rate regime. We formally assess and envisage the gradual evolution of the renminbi over time. We utilise nonlinear dependencies in the renminbi exchange rate and describe the smooth transition of the renminbi/US dollar (RMB/USD) exchange rate using the family of time-varying autoregressive (TV-AR) models. The results indicate that the forward-looking nonlinear model adequately depicts the gradual reform process underlying the new RMB exchange rate regime. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd.

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  • Michael Funke & Marc Gronwald, 2008. "The Undisclosed Renminbi Basket: Are the Markets Telling Us Something about Where the Renminbi-US Dollar Exchange Rate is Going?," The World Economy, Wiley Blackwell, vol. 31(12), pages 1581-1598, December.
  • Handle: RePEc:bla:worlde:v:31:y:2008:i:12:p:1581-1598
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    Cited by:

    1. Jarko Fidrmuc, 2010. "Time-Varying Exchange Rate Basket in China from 2005 to 2009," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 52(4), pages 515-529, December.
    2. Jarko Fidrmuc & Martin Siddiqui, 2015. "Exchange Rate Policy in China after the Financial Crisis: Evidence from Time-varying Exchange Rate Basket," Review of Development Economics, Wiley Blackwell, vol. 19(3), pages 608-623, August.
    3. 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.
    4. Aihua Wang & Faruk Balli & Xiumin Li, 2015. "Possible Best Currency Basket Selection from the Perspective of Real Effective Exchange Rate," Pacific Economic Review, Wiley Blackwell, vol. 20(4), pages 635-650, October.
    5. Wang, Gang-Jin & Xie, Chi, 2013. "Cross-correlations between Renminbi and four major currencies in the Renminbi currency basket," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(6), pages 1418-1428.
    6. Balasubramaniam, Vimal & Patnaik, Ila & Shah, Ajay, 2011. "Who cares about the Chinese Yuan?," Working Papers 11/89, National Institute of Public Finance and Policy.
    7. Zhang, Zhichao & Shi, Nan & Zhang, Xiaoli, 2011. "China’s new exchange rate regime, optimal basket currency and currency diversification," MPRA Paper 32642, University Library of Munich, Germany.
    8. Dominik A. Skopiec, 2014. "Perspektywy internacjonalizacji waluty Chin," Gospodarka Narodowa, Warsaw School of Economics, issue 1, pages 5-31.

    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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