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Time-Varying Exchange Rate Basket in China from 2005 to 2009

  • Jarko Fidrmuc

We use the Kalman filter to estimate the structure of the secret currency basket of the renminbi based on daily data between 2005 and 2009. The currency weights of selected currencies are modeled as stochastic processes (random walks). The official announcement of the new exchange rate regime in July 2005 with the introduction of a secret currency basket was followed by a smooth appreciation against the US dollar. Other currencies did not play a major role. We show that the US dollar again received a higher weight in the Chinese exchange rate policy already before the financial crisis of 2008.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-08/cesifo1_wp3147.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3147.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3147
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  1. Korhonen, Iikka & Ritola, Maria, 2009. "Renminbi misaligned - Results from meta-regressions," BOFIT Discussion Papers 13/2009, Bank of Finland, Institute for Economies in Transition.
  2. Jeffrey Frankel & Daniel, 2010. "Estimation of De Facto Flexibility Parameter and Basket Weights in Evolving Exchange Rate Regimes," Working Paper Series WP10-1, Peterson Institute for International Economics.
  3. Carmen M. Reinhart & Kenneth S. Rogoff, 2002. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," NBER Working Papers 8963, National Bureau of Economic Research, Inc.
  4. Funke, Michael & Gronwald, Marc, 2007. "The Undisclosed Renminbi Basket: Are The Markets Telling Us Something About Where The Renminbi - US Dollar Exchange Rate Is Going?," BOFIT Discussion Papers 20/2007, Bank of Finland, Institute for Economies in Transition.
  5. Matthieu Bussière & Jarko Fidrmuc & Bernd Schnatz, 2008. "EU Enlargement and Trade Integration: Lessons from a Gravity Model," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 562-576, 08.
  6. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  7. Barry Eichengreen & Hui Tong, 2005. "Is China's FDI Coming at the Expense of Other Countries?," NBER Working Papers 11335, National Bureau of Economic Research, Inc.
  8. Jeffrey Frankel, 2006. "On the Yuan: The Choice between Adjustment under a Fixed Exchange Rate and Adjustment under a Flexible Rate," CESifo Economic Studies, CESifo, vol. 52(2), pages 246-275, June.
  9. Samuel Reynard, 2008. "What Drives the Swiss Franc?," Working Papers 2008-14, Swiss National Bank.
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