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The evolving renminbi regime and implications for Asian currency stability

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  • Guonan Ma
  • Robert McCauley

Abstract

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.

Suggested Citation

  • Guonan Ma & Robert McCauley, 2010. "The evolving renminbi regime and implications for Asian currency stability," BIS Working Papers 321, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:321
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    References listed on IDEAS

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    Keywords

    exchange rate regime; renminbi; effective exchange rate; regional currency stability; regional monetary cooperation;

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