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RMB equilibrium exchange rate and misalignment: Insights from the CN-NATREX Model

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  • Wei, Wei
  • Tang, Zefeng

Abstract

This study builds a RMB natural equilibrium exchange rate (CN-NATREX) model to evaluate the impact of intensifying international competition on the RMB’s NATREX and misalignment. Using China’s data, we confirm the model’s robustness, obtaining dynamics of equilibrium and competition. Results indicate that the RMB underwent an adjustment period from 2013 to 2014. Before this period, the RMB was undervalued; subsequently, it became significantly overvalued, with a misalignment forming a left-tailed inverted U. The findings strengthen the NATREX framework, offering an innovative approach for exchange rate policy amid complex global economic dynamics.

Suggested Citation

  • Wei, Wei & Tang, Zefeng, 2025. "RMB equilibrium exchange rate and misalignment: Insights from the CN-NATREX Model," Finance Research Letters, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325007408
    DOI: 10.1016/j.frl.2025.107481
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    References listed on IDEAS

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