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Just how undervalued is the Chinese renminbi?

  • Funke, Michael

    ()

    (Hamburg University)

  • Rahn, Jörg

    ()

    (Hamburg University)

Given that the value of China’s currency has been hot topic recently, this paper explores the equilibrium levels of China’s real and nominal exchange rates. Employing a Johansen cointegration framework, we focus on the behavioral equilibrium exchange rate (BEER) and permanent equilibrium exchange rate (PEER) models. Our results suggest that, while the renminbi is somewhat undervalued against the dollar, the misalignment is not nearly as exaggerated as many popular claims.

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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 14/2004.

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Length: 40 pages
Date of creation: 07 Jul 2004
Date of revision:
Publication status: Published in The World Economy, 2005, pages 465-489.
Handle: RePEc:hhs:bofitp:2004_014
Contact details of provider: Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
Web page: http://www.suomenpankki.fi/bofit_en/
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