Renminbi already overappreciated: Evidence from FEERs (1994-2008)

HU Chuntian1  and CHEN Zhijun2

1Ph.D. in economics, Princeton University; Professor, Jinhe Center for Economic Research, Xi’an Jiaotong University and Department of Economics, Chinese Culture University, Taiwan.

2Ph. D. in economics, Jinhe Center for Economic Research, Xi’an Jiaotong University

 
Abstract:

The renminbi appreciated against the U.S. dollar by 21% from July 2005 to February 2009. Thousands of enterprises filed bankruptcy and many people lost their jobs in 2007-2008, all of which was possibly the result of over-appreciation. Nevertheless, estimation of the RMB equilibrium rate in recent studies shows that the current rate is still undervalued. By estimating the RMB fundamental equilibrium exchange rate, in contrast with other studies, we have found that the RMB rate may have been overvalued by the end of 2008.

Key words: RMB, real exchange rate, exchange-rate misalignment

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