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Exchange rate misalignments: a comparison of China today against recent historical experiences of Japan, Germany, Singapore and Taiwan

He, Xinhua and Qin, Duo and Liu, Yimeng (2012) 'Exchange rate misalignments: a comparison of China today against recent historical experiences of Japan, Germany, Singapore and Taiwan.' Journal of Chinese Economic & Business Studies, 10 (3). pp. 247-266.

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Abstract

The familiar claim of Chinese currency manipulation is generally asserted without reference to empirical evidence. To investigate the legitimacy of the claim, we ask if the undervalued misalignment found in the real effective exchange rate (REER) of the Chinese renminbi (RMB) over the past decade has any recent historical precedents. Four cases are examined: the Japanese yen, the Deutschmark (DM), the Singapore dollar and the new Taiwan dollar. Panel-based misalignment estimates of the REER of the four currencies are obtained using quarterly data from the late 1970s to the early 2000s. Our estimates suggest that there are precedents to the recent misalignment of the RMB in terms of magnitude, duration or breadth of currency coverage, and that a net build-up in foreign assets does not necessarily result in currency misalignment. In addition to finding little empirical justification for the claim of Chinese currency manipulation, we note that REER misalignment runs a risk of propagating inflation in the home economy.

Item Type: Articles
SOAS Departments & Centres: Faculty of Law and Social Sciences > Department of Economics
ISSN: 14765284
DOI (Digital Object Identifier): 10.1080/14765284.2012.699703
Depositing User: Duo Qin
Date Deposited: 31 Aug 2012 14:12
URI: http://eprints.soas.ac.uk/id/eprint/14197

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