Is the Chinese Renminbi Undervalued?

Tatom, John (2007): Is the Chinese Renminbi Undervalued? Published in: Research Buzz , Vol. 3, No. 3 (31 March 2007): pp. 1-3.

Abstract

The Chinese government has come under increasing criticism from both the U.S. government and some critics in U.S. industry for manipulating its currency. This article offers some insight on whether the yuan is correctly valued. Evidence suggests that, regardless of whether a fixed exchange rate or a market-driven exchange rate is used, the yuan is close to a correct value, and efforts to force more appreciation could be deflationary for China.

• Item Type: MPRA Paper
• Language: English
• Keywords: exchange rate valuation; fixed exchange rate; real exchange rate
• Subjects: F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

References

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Froot, Kenneth A. and Kenneth S. Rogoff, “Perspectives on PPP and Long-Run Real Exchange Rates,” in Gene Grossman and Kenneth Rogoff (eds.), Handbook of International Economics, (Amsterdam: Elsevier Science Publishers B.V.,1995), pp. 1647-88.

Mishkin, Frederic S., “The Foreign Exchange Market,” Chapter 19 in The Economics of Money, Banking and Financial Markets, 7th Edition, Addison-Wesley series in Economics, 2004, pp. 435-61.

Spence, Michael, “We Are All in It Together,” Wall Street Journal, January 5, 2007. (Spence argues that a real exchange rate appreciation must occur in a rapidly growing emerging market).

Taylor, Alan M. and M.P. Taylor, “The Purchasing Power Parity Debate,” The Journal of Economic Perspectives, 18, 2004, pp. 135-158.