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Just How Undervalued is the Chinese Renminbi?
Author(s) -
Funke Michael,
Rahn Jörg
Publication year - 2005
Publication title -
world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2005.00688.x
Subject(s) - renminbi , economics , cointegration , exchange rate , currency , us dollar , liberian dollar , china , value (mathematics) , monetary economics , effective exchange rate , macroeconomics , international economics , econometrics , mathematics , statistics , finance , law , political science
Given that the value of China's currency has been a hot topic recently, this paper explores the equilibrium levels of China's real and nominal exchange rates. Employing a Johansen cointegration framework, we focus on the behavioural equilibrium exchange rate (BEER) and permanent equilibrium exchange rate (PEER) models. Our results suggest that, while the renminbi is somewhat undervalued against the dollar, the misalignment is not nearly as exaggerated as many popular claims.