The Overvaluation of Renminbi Undervaluation

CESifo Working Paper Series No. 1918

HKIMR Working Paper No. 11/2007

37 Pages Posted: 27 Feb 2007

See all articles by Yin-Wong Cheung

Yin-Wong Cheung

University of California, Santa Cruz - Department of Economics

Menzie David Chinn

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics; National Bureau of Economic Research (NBER)

Eiji Fujii

CESifo (Center for Economic Studies and Ifo Institute); Kwansei Gakuin University - School of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: June 2007

Abstract

We evaluate whether the Renminbi (RMB) is misaligned, relying upon conventional statistical methods of inference. A framework built around the relationship between relative price and relative output levels is used. We find that, once sampling uncertainty and serial correlation are accounted for, there is little statistical evidence that the RMB is undervalued. The result is robust t various choices of country samples and sample periods, as well as to the inclusion of control variables.

Keywords: absolute purchasing power parity, exchange rates, real income, capital controls, currency misalignment

JEL Classification: F31, F41

Suggested Citation

Cheung, Yin-Wong and Chinn, Menzie David and Fujii, Eiji, The Overvaluation of Renminbi Undervaluation (June 2007). CESifo Working Paper Series No. 1918, HKIMR Working Paper No. 11/2007, Available at SSRN: https://ssrn.com/abstract=965402 or http://dx.doi.org/10.2139/ssrn.965402

Yin-Wong Cheung (Contact Author)

University of California, Santa Cruz - Department of Economics ( email )

Engineering 2, Department of Economics
University of California
Santa Cruz, CA 95064
United States
831-459-5077 (Fax)

Menzie David Chinn

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706-1393
United States
608-262-7397 (Phone)
608-262-2033 (Fax)

National Bureau of Economic Research (NBER)

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Eiji Fujii

CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Munich, DE-81679
Germany

Kwansei Gakuin University - School of Economics ( email )

1-155 Uegahara Ichiban-cho
Nishinomiya
Japan

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