IS THE CHINESE RENMINBI UNDERVALUED? Goh, Ming He; Kim, Yoonbai

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Authors
Goh, Ming He ; Kim, Yoonbai
Appears In
Contemporary Economic Policy
Subjects
Economic forecasting; Foreign exchange -- Analysis; article
Audience
Academic; Trade
Summary
This article seeks to investigate whether the renminbi (RMB) has become grossly undervalued by empirically estimating China's equilibrium real exchange rate for the period 1978-2002. A reduced form based on Edwards's (1989, 1994) developing-country model is estimated using the Engle-Granger two-step method. The results reveal that government expenditure, productivity, and the degree of trade restrictions in the economy affect the RMB. From these variables, the authors then derive the equilibrium rate and the degree of misalignments from it. The investigation shows that there is no evidence that the RMB is significantly undervalued in the last few years of the sample period. (JEL F31, F33, F42)
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http://trove.nla.gov.au/work/172216
Work ID
172216

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