The Evolving Renminbi Regime and Implications for Asian Currency Stability
22 Pages Posted: 30 Oct 2010
Date Written: September 1, 2010
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: Suggested Citation