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The Overvaluation of Renminbi Undervaluation

  • Yin-Wong Cheung
  • Menzie D. Chinn
  • Eiji Fujii

We evaluate whether the Renminbi (RMB) is misaligned, relying upon conventional statistical methods of inference. A framework built around the relationship between relative price and relative output levels is used. We find that, once sampling uncertainty and serial correlation are accounted for, there is little statistical evidence that the RMB is undervalued. The result is robust to various choices of country samples and sample periods, as well as to the inclusion of control variables.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1918.

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Date of creation: 2007
Date of revision:
Handle: RePEc:ces:ceswps:_1918
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  1. Jose De Gregorio & Holger C. Wolf, 1994. "Terms of Trade, Productivity, and the Real Exchange Rate," NBER Working Papers 4807, National Bureau of Economic Research, Inc.
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  8. Lamin Leigh & Steven Vincent Dunaway & Xiangming Li, 2006. "How Robust are Estimates of Equilibrium Real Exchange Rates: The Case of China," IMF Working Papers 06/220, International Monetary Fund.
  9. Jeffrey A. Frankel & C. Fred Bergsten & Michael L. Mussa, 1994. "Exchange Rate Policy," NBER Chapters, in: American Economic Policy in the 1980s, pages 293-366 National Bureau of Economic Research, Inc.
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  11. Ulrich Volz, 2010. "Prospects for Monetary Cooperation and Integration in East Asia," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262013991, June.
  12. Menzie David Chinn & Eswar Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration," IMF Working Papers 00/46, International Monetary Fund.
  13. Canzoneri, Matthew B & Cumby, Robert & Diba, Behzad, 1996. "Relative Labour Productivity and the Real Exchange Rate in the Long Run: Evidence for a Panel of OECD Countries," CEPR Discussion Papers 1464, C.E.P.R. Discussion Papers.
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