The Evolving Renminbi Regime and Implications for Asian Currency Stability

22 Pages Posted: 30 Oct 2010

See all articles by Guonan Ma

Guonan Ma

Bruegel

Robert N. McCauley

Bank for International Settlements (BIS)

Date Written: September 1, 2010

Abstract

The Chinese authorities described the management of the renminbi after its 2005 unpegging from the US dollar as involving a basket of trading partner currencies. Outside analysts have detected few signs of such management. We find that, in the two years from mid-2006 to mid-2008, the renminbi strengthened gradually against trading partners' currencies within a narrow band. In mid-2008, the financial crisis interrupted this experiment and the bilateral renminbi/dollar exchange rate stabilised at 6.8. The 2006-08 experience suggests that a shared policy of gradual nominal effective appreciation renders East Asian currencies quite stable against one another. Such a shared policy would create favourable conditions for regional monetary cooperation.

Keywords: Exchange Rate Regime, Renminbi, Effective Exchange Rate, Regional Currency Stability, Regional Monetary Cooperation

JEL Classification: F31, F33

Suggested Citation

Ma, Guonan and McCauley, Robert N., The Evolving Renminbi Regime and Implications for Asian Currency Stability (September 1, 2010). BIS Working Paper No. 321. Available at SSRN: https://ssrn.com/abstract=1699782 or http://dx.doi.org/10.2139/ssrn.1699782

Guonan Ma (Contact Author)

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium
Belgium

Robert N. McCauley

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

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