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The Overvaluation of Renminbi Undervaluation

Author

Listed:
  • Yin-wong Cheung

    (University of California, Santa Cruz)

  • Menzie D. Chinn

    (University of Wisconsin, Madison and NBER)

  • Eiji Fujii

    (University of Tsukuba)

Abstract

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.

Suggested Citation

  • Yin-wong Cheung & Menzie D. Chinn & Eiji Fujii, 2007. "The Overvaluation of Renminbi Undervaluation," Working Papers 112007, Hong Kong Institute for Monetary Research.
  • Handle: RePEc:hkm:wpaper:112007
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    References listed on IDEAS

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    More about this item

    Keywords

    absolute purchasing power parity; exchange rates; real income; capital controls; currency misalignment.;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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