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A New Assessment of the Chinese RMB Exchange Rate

Author

Listed:
  • Zhang, Zhibai
  • Chen, Langnan
Abstract
The ratio, Penn effect and behavioral equilibrium exchange rate (BEER) are used to assess the level of the bilateral real exchange rate (RER) of the Chinese RMB against the US dollar in 1980–2012. The statistical indexes and economic meaning indicate that the findings from the BEER and ratio model are more reasonable. Based on the two models, the RMB was overvalued by 10–20% in 2011–2012. Given the already overvalued currency and the not-ideal economic situation of China, such a fast RER appreciation of 6.6–6.7% per year as it was in 2005–2012 is not sustainable. Further, corresponding policy proposals are given.

Suggested Citation

  • Zhang, Zhibai & Chen, Langnan, 2013. "A New Assessment of the Chinese RMB Exchange Rate," MPRA Paper 49315, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:49315
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    Cited by:

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    2. Khalid, Waqar & Civcir, Irfan & Özdeşer, Hüseyin & Iqbal, Javed, 2023. "The asymmetric impact of real exchange rate misalignment on growth dynamics in Turkey," Journal of Policy Modeling, Elsevier, vol. 45(6), pages 1184-1203.
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    5. Almås, Ingvild & Grewal, Mandeep & Hvide, Marielle & Ugurlu, Serhat, 2017. "The PPP approach revisited: A study of RMB valuation against the USD," Journal of International Money and Finance, Elsevier, vol. 77(C), pages 18-38.
    6. Vaseem Akram & Badri Narayan Rath, 2018. "Exchange rate misalignment and total factor productivity growth in case of emerging market economies," International Economics and Economic Policy, Springer, vol. 15(3), pages 547-564, July.
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    9. Yin-Wong Cheung & Shi He, 2019. "Truths and Myths About RMB Misalignment: A Meta-analysis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(3), pages 464-492, September.
    10. Andrea Salazar-Díaz & Aarón Levi Garavito-Acosta & Sergio Restrepo Ángel & Leidy Viviana Arcila-Agudelo, 2023. "Real Equilibrium Exchange Rate in Colombia: Thousands of VEC Models Approach," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 99, pages 33-78, July-Dece.
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    12. Baak, SaangJoon, 2017. "Is the yen misaligned more during the Abenomics period?," Japan and the World Economy, Elsevier, vol. 44(C), pages 26-34.
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    15. Gao, Yichen & Li, Hongjun & Li, Qi, 2022. "The misalignments in Chinese real effective exchange rate from 1994 to 2020: A counterfactual analysis," China Economic Review, Elsevier, vol. 75(C).
    16. Ramos-Herrera María del Carmen, 2022. "How Equilibrium Exchange Rate Misalignments Influence on Economic Growth? Evidence for European Countries," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 16(1), pages 199-211, January.

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    More about this item

    Keywords

    Chinese RMB; Misalignment; Ratio model; Penn effect; Behavioral equilibrium exchange rate;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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