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The Renminbi Equilibrium Exchange Rate: An Agnostic View

Author

Listed:
  • Sana Mestiri

    (SDF - Laboratoire Structure et Dynamiques Financières - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres)

  • Henri Sterdyniak

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Antoine Bouveret

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

The alleged undervaluation of the renminbi has been the subject of intensive academic research over the past few years. Using equilibrium exchange rate models many authors have concluded that the renminbi is undervalued by 15 to 30% against the US dollar. Yet China has been experiencing strong economic growth for a decade and does not seem to suffer from the supposed misalignment of its exchange rate, with low inflation rate and current account surpluses. The estimations assume that the economy is at full-employment, a strong hypothesis for China, where unemployment amounts to 150 million people. This article claims that a low exchange rate is suited for the objectives of Chinese economic policy. The exchange rate can be undervalued according to traditional models and in equilibrium compared to the government's policy objectives as shown by a theoretical model.
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Suggested Citation

  • Sana Mestiri & Henri Sterdyniak & Antoine Bouveret, 2008. "The Renminbi Equilibrium Exchange Rate: An Agnostic View," Post-Print hal-03416546, HAL.
    • Handle: RePEc:hal:journl:hal-03416546
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    Cited by:

    1. Gan, Christopher & Ward, Bert & Ting, Su Ting & Cohen, David A., 2013. "An empirical analysis of China's equilibrium exchange rate: A co-integration approach," Journal of Asian Economics, Elsevier, vol. 29(C), pages 33-44.
    2. Das, Dilip K., 2009. "The evolution of renminbi yuan and the protracted debate on its undervaluation: An integrated review," Journal of Asian Economics, Elsevier, vol. 20(5), pages 570-579, September.
    3. Ana Cardoso & António Portugal Duarte, 2017. "The impact of the Chinese exchange policy on foreign trade with the European Union," Brazilian Journal of Political Economy, Center of Political Economy, vol. 37(4), pages 870-893.

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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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