The Chinese RMB: Its Value, Its Peg, and Its Future

Chu, Ted H.
April 2005
Business Economics;Apr2005, Vol. 40 Issue 2, p7
Academic Journal
The valuation of the Chinese renminbi (RMB) has drawn lots of attention lately and a great deal of pressure on the part of developed nations for revaluation. In addressing the issue of valuation, this paper develops a new purchasing power parity (PPP) index of China's exchange rate and finds that the while undervalued, the undervaluation is neither unusual nor bad policy. Moreover, China's overall external trade balance does not seem to be that far out of equilibrium. China's desire to join the G-7 club is likely to result in abandoning its peg, however, despite the increased risk to its economic development.


Related Articles

  • A Simple Model and its Application in the Valuation of Eleven Main Real Exchange Rates. Zhibai Zhang // International Research Journal of Finance & Economics;9/1/2012, Issue 97, p55 

    A simple currency valuation model is given. The model is based on the Penn effect but reduces the uncertainty of the econometric specification that the Penn effect and many other models have. I use the model to valuate eleven main currencies' bilateral real exchange rate against the US dollar...

  • A Comparison of the Beer and Penn Effect Models via Their Applications in the Renminbi Valuation. Zhibai Zhang // International Research Journal of Finance & Economics;9/1/2012, Issue 97, p138 

    The behavioral equilibrium exchange rate (BEER) and the Penn effect models are compared via their applications on the valuation of the Renminbi (RMB). Considering the two models' bases and applications, I conclude that, in time-series and cross-section data settings, the Penn effect model is the...

  • WHY CHINA WANTS TO PEG IT'S CURRENCY? AN EMPIRICAL INVESTIGATION. Adhikari, Deergha Raj; Guru-Gharana, Kishor K. // Allied Academies International Conference: Proceedings of the Ac;2014, Vol. 14 Issue 1, p1 

    Our study develops two propositions for establishing the superiority of a flexible exchange rate system over a fixed one. These propositions require one of the two following conditions: a) either purchasing power parity holds between two countries, or b) the output target of the reference...

  • The rand's real value. Preece, Howard // Finance Week;09/01/2000, p18 

    Asserts that South Africa's (SA) currency, the rand, is undervalued, according to Reserve Bank Governor Tito Mboweni. Failure of exchange rates to bring about purchasing power parity; Tendency of big-ticket items such as cars to cost more in SA; Factors blamed for the rand's failure to surge on...

  • The Renminbi Debate: A Review of Controversies and New Developments. Yoonbai Kim // SERI Quarterly;Oct2012, Vol. 5 Issue 4, p52 

    The article offers information on the exchange rate of Chinese currency renminbi (RMB). It states that main reason behind the global imbalance and global financial crises of 2008 is RMB exchange rate. It discusses various methods that can be used for analyzing that RMB is not undervalued which...

  • A new assessment of the Chinese RMB exchange rate. Zhang, Zhibai; Chen, Langnan // China Economic Review (1043951X);Sep2014, Vol. 30, p113 

    The ratio, Penn effect and behavioral equilibrium exchange rate (BEER) are used to assess the level of the bilateral real exchange rate 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...

  • How to Measure Overvaluation? Yahia, Boucheta; Adouka, Lakhdar // Mediterranean Journal of Social Sciences;May2013, Vol. 4 Issue 2, p239 

    This article aims to identify indicators and measurement criteria of an overvalued exchange rate. To achieve this goal, we will try to describe and analyze the main theories and measurement criteria overvalued exchange rate, to highlight the measurement criteria that explain the value or...

  • Quantifying the Half-Life of Deviations from PPP: The Role of Economic Priors. Kilian, Lutz; Zha, Tao // Working Paper Series (Federal Reserve Bank of Atlanta);Dec99, Vol. 1999 Issue 21, preceding page p1 

    Discusses the role of the half-life of deviations from purchasing power parity in the debate about the ability of macroeconomic models to account for the time series behavior of the real exchange rate. Explicit probability statements about the half-life; Assessment of the likelihood that the...

  • The Exchange Rate and Purchasing-Power Parity in Relation to the Czechoslovak Crown. Mervart, Josef // Russian & East European Finance & Trade;Fall92, Vol. 28 Issue 3, p61 

    Examines the exchange rate and purchasing-power parity in Czechoslovakia. Unification of the commercial and noncommercial exchange rate; Deviations from exchange rate and purchasing power parity; Relationship of exchange rate policy and the development of selected economic activities.


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics