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The evolving renminbi regime and implications for Asian currency stability

Listed author(s):
  • Guonan Ma
  • Robert McCauley

The Chinese authorities described the management of the renminbi after its 2005 unpegging from the US dollar as involving a basket of trading partner currencies. Outside analysts have detected few signs of such management. We find that, in the two years from mid-2006 to mid-2008, the renminbi strengthened gradually against trading partners' currencies within a narrow band. In mid-2008, the financial crisis interrupted this experiment and the bilateral renminbi/dollar exchange rate stabilised at 6.8. The 2006-08 experience suggests that a shared policy of gradual nominal effective appreciation renders East Asian currencies quite stable against one another. Such a shared policy would create favourable conditions for regional monetary cooperation.

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Paper provided by Bank for International Settlements in its series BIS Working Papers with number 321.

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Length: 22 pages
Date of creation: Sep 2010
Handle: RePEc:bis:biswps:321
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