Zhibai, Zhang (2012): RMB Undervaluation and Appreciation.
Preview |
PDF
MPRA_paper_40978.pdf Download (235kB) | Preview |
Abstract
The bilateral real exchange rate between Chinese renminbi (RMB) and the US dollar is studied. The panel data Penn effect model shows that the RMB was overvalued in 1980–1991 but later undervalued in 1992–2010. In 2010, it was undervalued by 36.7%. Econometric analysis and an examination of the appreciation of seventeen currencies belonging to countries and areas under the same economic development stage show that the RMB should appreciate at an annual speed of 3.2%. At this rate, the RMB misalignment in 2010 will be corrected by 2020. In the future, RMB appreciation should be realized totally from the nominal exchange rate, not partly from the nominal exchange rate and partly from the relative price level. This appreciation path satisfies the interests of both China and the US.
Item Type: | MPRA Paper |
---|---|
Original Title: | RMB Undervaluation and Appreciation |
Language: | English |
Keywords: | Chinese renminbi; Real exchange rate; Penn effect; Undervaluation; Appreciation |
Subjects: | F - International Economics > F3 - International Finance > F31 - Foreign Exchange |
Item ID: | 40978 |
Depositing User: | Dr Zhibai Zhang |
Date Deposited: | 31 Aug 2012 15:51 |
Last Modified: | 27 Sep 2019 08:42 |
References: | Bergsten, C. F. (2010). Correcting the Chinese Exchange Rate. Peterson Institute for International Economics Congressional Testimony, Washington, DC. http://www.iie.com/publications/interstitial.cfm?ResearchID=1655. Chang, G., & Shao, Q. (2004). How much is the Chinese currency undervalued? A quantitative estimation. China Economic Review, 15, 366-371. Cheung, Y., Chinn, M., & Fujii, E. (2007). The overvaluation of renminbi undervaluation. Journal of International Money and Finance, 26, 762-785. Cheung, Y., Chinn, M., & Fujii, E. (2010). Measuring renminbi misalignment: where do we stand? Korea and the World Economy, 11, 263-296. Cline, W., & Williamson, J. (2011). The Current Currency Situation. Peterson Institute for International Economics Policy Brief No.11-18, Washington, DC. http://www.iie.com/publications/interstitial.cfm?ResearchID=1982. Eichengreen, B. (2011). The renminbi as an international currency. Journal of Policy Modeling, 33, 723–730. Frankel, J. (2005). On the renminbi: the choice between adjustment under a fixed exchange rate and adjustment under a flexible rate. NBER working paper No. 11274, Cambridge, MA. Frenkel, R., & Ros, J. (2006). Unemploymet and the real exchange rate in Latin America. World Development, 34, 631–646. Isard, P. (2007). Equilibrium exchange rates: assessment methodologies. IMF Working Paper No. 296, Washington, DC. Takeuchi, F. (2003). How undervalued is the Chinese yuan? A new examination of purchasing power parity. Japan Center for Economic Research Researcher Report No. 23, Tokyo. Thorbecke,W., & Zhang, h. (2009). The effect of exchange rate changes on china’s labour-intensive manufacturing exports. Pacific Economic Review, 14, 398–409. Wang, Y., Hui, X., & Soofi, Abdol S. (2007). Estimating renminbi (RMB) equilibrium exchange rate. Journal of Policy Modeling, 29, 417-429. Xu, Y. (2008). Lessons from Taiwan’s experience of currency appreciation. China Economic Review, 19, 53–65. Xu, Y. (2009). Relevant international experience of real exchange rate adjustment for China. China Economic Review, 20, 440–451. Zhang, j., & Fung, H. G. (2006). Winners and losers: assessing the impact of Chinese yuan appreciation. Journal of Policy Modeling, 28, 995–1009. Zhang,Y., & Wan, G. (2008). Correcting China’s trade imbalance: monetary means will not suffice. Journal of Policy Modeling, 30, 505–521. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/40978 |