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The Undisclosed Renminbi Basket: Are The Markets Telling Us Something About Where The Renminbi - US Dollar Exchange Rate Is Going?

  • Funke, Michael

    ()

    (BOFIT)

  • Gronwald, Marc

    ()

    (BOFIT)

On 21 July 2005 China adopted an undisclosed basket exchange rate regime. We formally assess and envisage the gradual evolution of the renminbi over time. We utilize nonlinear dependencies in the renminbi exchange rate and describe the smooth transition of the renminbi/U.S. dollar (RMB/USD) exchange rate using the family of time-varying autoregressive (TV-AR) models. Specifically, the nonlinear models allow for a smooth transition from one optimal level to another. Our estimation results imply that the RMB/USD exchange rate will likely be about 7.42 RMB/USD in summer/autumn 2008.

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File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/dp2007.pdf
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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 20/2007.

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Length: 27 pages
Date of creation: 06 Nov 2007
Date of revision:
Handle: RePEc:hhs:bofitp:2007_020
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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