Exchange rate misalignments: a comparison of China today against recent historical experiences of Japan, Germany, Singapore and Taiwan
The familiar claim of Chinese currency manipulation is generally asserted without reference to empirical evidence. To investigate the legitimacy of the claim, we ask if the undervalued misalignment found in the real effective exchange rate (REER) of the Chinese renminbi (RMB) over the past decade has any recent historical precedents. Four cases are examined: the Japanese yen, the Deutschmark (DM), the Singapore dollar and the new Taiwan dollar. Panel-based misalignment estimates of the REER of the four currencies are obtained using quarterly data from the late 1970s to the early 2000s. Our estimates suggest that there are precedents to the recent misalignment of the RMB in terms of magnitude, duration or breadth of currency coverage, and that a net build-up in foreign assets does not necessarily result in currency misalignment. In addition to finding little empirical justification for the claim of Chinese currency manipulation, we note that REER misalignment runs a risk of propagating inflation in the home economy.
Volume (Year): 10 (2012)
Issue (Month): 3 (May)
|Contact details of provider:|| Web page: http://www.tandfonline.com/RCEA20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RCEA20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- M Ali Khan, 2007.
Microeconomics Working Papers
22207, East Asian Bureau of Economic Research.
- Maurice Obstfeld, 2009. "Time of Troubles: The Yen and Japan's Economy, 1985-2008," NBER Working Papers 14816, National Bureau of Economic Research, Inc.
- MacDonald, Ronald & Ricci, Luca Antonio, 2007. "Real exchange rates, imperfect substitutability, and imperfect competition," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 639-664, December.
- Ramkishen S. Rajan & Reza Siregar, 2002. "Choice of Exchange Rate Regime: Currency Board (Hong Kong) or Monitoring Band (Singapore)?," Australian Economic Papers, Wiley Blackwell, vol. 41(4), pages 538-556, December.
- Bénassy-Quéré, Agnès & Lahrèche-Révil, Amina & Mignon, Valérie, 2011.
"World-consistent equilibrium exchange rates,"
Journal of the Japanese and International Economies,
Elsevier, vol. 25(2), pages 12-32, June.
- Ronald McKinnon & Gunther Schnabl, 2003.
"China: A Stabilizing or Deflationary Influence in East Asia? THe Problem of Conflict Virtue,"
232003, Hong Kong Institute for Monetary Research.
- Schnabl, Gunther, 2003. "China: a stabilizing or deflationary influence in East Asia?The problem of conflicted virtue," Tübinger Diskussionsbeiträge 263, University of Tübingen, School of Business and Economics.
- Ronald McKinnon & Gunther Schnabl, 2003. "China: A Stabilizing or Deflationary Influence in East Asia? The Problem of Conflicted Virtue," Working Papers 03007, Stanford University, Department of Economics.
- Staiger, Robert W. & Sykes, Alan O., 2010.
"‘Currency manipulation’ and world trade,"
World Trade Review,
Cambridge University Press, vol. 9(04), pages 583-627, October.
- Richard C. Marston, 1986. "Real Exchange Rates and Productivity Growth in the United States and Japan," NBER Working Papers 1922, National Bureau of Economic Research, Inc.
- Adam S. Posen, 1998. "Restoring Japan's Economic Growth," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 35, December.
- Takatoshi Ito & Anne O. Krueger, 1999. "Introduction to "Changes in Exchange Rates in Rapidly Development Countries: Theory, Practice, and Policy Issues (NBER-EASE volume 7)"," NBER Chapters, in: Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues (NBER-EASE volume 7), pages 1-8 National Bureau of Economic Research, Inc.
- Christoph Fischer & Karlhans Sauernheimer, 2002. "A History of the D-Mark's Real External Value," Australian Economic Papers, Wiley Blackwell, vol. 41(4), pages 480-498, December.
- Gianluca Benigno & Christoph Thoenissen, 2003.
"Equilibrium Exchange Rates and Supply-Side Performance,"
Royal Economic Society, vol. 113(486), pages C103-C124, March.
- Gianluca Benigno & Christoph Thoenissen, 2002. "Equilibrium exchange rates and supply-side performance," Bank of England working papers 156, Bank of England.
- Benigno, Gianluca & Christoph Thoenissen, 2002. "Equilibrium Exchange Rates and Supply Side Performance," Royal Economic Society Annual Conference 2002 19, Royal Economic Society.
- Deutsche Bundesbank, (ed.), 1999. "Fifty Years of the Deutsche Mark: Central Bank and the Currency in Germany since 1948," OUP Catalogue, Oxford University Press, number 9780198292548, March.
When requesting a correction, please mention this item's handle: RePEc:taf:jocebs:v:10:y:2012:i:3:p:247-266. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.