The Chinese currency: how undervalued and how much does it matter?
The size of the imbalance in China’s external payments suggests that the RMB is significantly undervalued. This does not appear to have had significant adverse effects on the Chinese economy to date, but the costs of holding down the exchange rate are likely to rise in the future. While the contribution of the RMB to external imbalances is often exaggerated, currency adjustment will be a necessary element of the adjustment process. A more flexible exchange rate is in China's medium-term interests, but the pace of adjustment and its sequencing with other reforms will need to be carefully managed. Precipitate moves could be costly both to China and to global markets.
Volume (Year): (2005)
Issue (Month): 4 (December)
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- Michael Funke & Jörg Rahn, 2005.
"Just How Undervalued is the Chinese Renminbi?,"
The World Economy,
Wiley Blackwell, vol. 28(4), pages 465-489, 04.
- Funke, Michael & Rahn, Jörg, 2004. "Just how undervalued is the Chinese renminbi," BOFIT Discussion Papers 14/2004, Bank of Finland, Institute for Economies in Transition.
- Michael Funke & Jörg Rahn, 2005. "Just how Undervalued is the Chinese Renminbi," Quantitative Macroeconomics Working Papers 20504, Hamburg University, Department of Economics.
- Virginie Coudert & Cécile Couharde, 2005. "Real Equilibrium Exchange Rate in China," Working Papers 2005-01, CEPII research center.
- Frankel, Jeffrey, 2004. "On the Renminbi: The Choice between Adjustment under a Fixed Exchange Rate and Adustment under a Flexible Rate," Working Paper Series rwp04-037, Harvard University, John F. Kennedy School of Government.
- Jeffrey Frankel, 2005. "On the Renminbi: The Choice between Adjustment under a Fixed Exchange Rate and Adjustment under a Flexible Rate," NBER Working Papers 11274, National Bureau of Economic Research, Inc.
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