De facto currency baskets of China and East Asian economies: The rising weights
We employ Bayesian method to estimate a time-varying coefficient version of the de facto currency basket model of Frankel and Wei (2007) for the RMB of China, using daily data from February 2005 to July 2011. We estimate jointly the implicit time-varying weights of all 11 currencies in the reference basket announced by the Chinese government. We find the dollar weight has been reduced and sometimes significantly smaller than one, but there is no evidence of systematic operation of a currency basket with discernable pattern of significant weights on other currencies. During specific periods, the reduced dollar weight has not been switched to other major international currencies, but to some East Asian currencies, which is hard to explain by trade importance to or trade competition with China. We examine currency baskets of these East Asian Economies, including major international currencies and the RMB in their baskets. We find an evident tendency of Malaysia and Singapore to increase the weights of RMB in their own currency baskets, and a steadily and significantly positive weight of RMB in the basket of Thailand. These evidences suggest that, the positive weights of some East Asian currencies in RMB currency basket during specific periods largely reflect the fact that these East Asia economies have been systematically placing greater weights on RMB under the new regime of RMB exchange rate.
|Date of creation:||23 Feb 2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
Web page: http://www.suomenpankki.fi/bofit_en/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zhang, Zhichao & Shi, Nan & Zhang, Xiaoli, 2011.
"China’s new exchange rate regime, optimal basket currency and currency diversification,"
32642, University Library of Munich, Germany.
- Zhang, Zhichao & Shi, Nan & Zhang, Xiaoli, 2011. "China’s new exchange rate regime, optimal basket currency and currency diversification," BOFIT Discussion Papers 19/2011, Bank of Finland, Institute for Economies in Transition.
- Cai Zongwu & Chen Linna & Fang Ying, 2012.
"A New Forecasting Model for USD/CNY Exchange Rate,"
Studies in Nonlinear Dynamics & Econometrics,
De Gruyter, vol. 16(3), pages 1-20, September.
- Jeffrey A. Frankel & Shang-Jin Wei, 2007.
"Assessing China's Exchange Rate Regime,"
NBER Working Papers
13100, National Bureau of Economic Research, Inc.
- Jarko Fidrmuc, 2010.
"Time-Varying Exchange Rate Basket in China from 2005 to 2009,"
Comparative Economic Studies,
Palgrave Macmillan, vol. 52(4), pages 515-529, December.
- Jarko Fidrmuc, 2010. "Time-Varying Exchange Rate Basket in China from 2005 to 2009," CESifo Working Paper Series 3147, CESifo Group Munich.
- Jeffrey A. Frankel, 2009.
"New Estimation Of China'S Exchange Rate Regime,"
Pacific Economic Review,
Wiley Blackwell, vol. 14(3), pages 346-360, 08.
- Jeffrey A. Frankel, 2009. "New Estimation of China's Exchange Rate Regime," NBER Working Papers 14700, National Bureau of Economic Research, Inc.
- Frankel, Jeffrey, 2008. "New Estimation of China's Exchange Rate Regime," Working Paper Series rwp08-077, Harvard University, John F. Kennedy School of Government.
- Eiji Ogawa & Michiru Sakane, 2006. "Chinese Yuan after Chinese Exchange Rate System Reform," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(6), pages 39-57.
When requesting a correction, please mention this item's handle: RePEc:hhs:bofitp:2012_002. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Päivi Määttä)
If references are entirely missing, you can add them using this form.