Real Exchange Rate Misalignment in China: An Empirical Investigation

Zhang, Zhichao

doi:10.1006/jcec.2000.1705

Cited by 101 publications

(106 citation statements)

References 18 publications

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“…The theoretical and econometric framework of the BEER model are described by Baffes et al (1997), Clark andMacDonald (1998), andZhang (2001). Clark and MacDonald (1998) in describing the BEER model believe that the actual real exchange rate (RER) is in equilibrium in a behavioral sense when its movements reflect changes in the economic fundamentals that are found to be related to the actual real exchange rate in a well-defined statistical manner.…”

Section: The Beer Modelmentioning

confidence: 99%

“…2 Filter procedure and permanent values are used by Wang et al (2007), but are not used by Zhang (2001) and Goh and Kim (2006). The only difference between the BEER model and the so-called permanent equilibrium exchange rate (PEER) model in Funke and Rahn (2005) is whether or not the filter procedure is used.…”

Section: The Beer Modelmentioning

confidence: 99%

“…Most notable among these are the behavioral equilibrium exchange rate (BEER) model and the Penn effect model. The BEER model has been employed by Zhang (2001), Funke and Rahn (2005), Goh and Kim (2006), and Wang et al (2007). Conversely, the Penn effect model has been employed by Chang and Shao (2004), Frankel (2005), Cheung et al (2007), and Coudert and Couharde (2007).…”

Section: Introductionmentioning

confidence: 99%

“…The other focus is finding which model can provide a more reasonable result given their seemingly great differences. For example (see Table 2 in Section 5.3.1), Zhang (2001) and Goh and Kim (2006) use the BEER model and respectively conclude that the Renminbi (RMB) was undervalued by 60% and13% in 1978. However, Chang andShao (2004) and Cheung et al (2007) use the Penn effect model and respectively conclude that the RMB was overvalued by 51.3% and 90% in the same year.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

A Comparison of the Beer and Penn Effect Models Via Their Applications on the Valuation of the Renminbi

Zhang

2012

SSRN Journal

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The behavioral equilibrium exchange rate (BEER) and the Penn effect models are compared via their applications on the valuation of the Renminbi (RMB). The definition for the Penn effect model is provided. The differences and relations between the two models in various econometric method settings are listed and explained.The Penn effect model is concluded to be the more reasonable model in terms of the valuation of the RMB under the time-series and cross-section data settings. In addition, the criteria and methods of comparing different model findings are given and used to compare typical misalignment results on RMB derived from the two models. JEL classification: F31; F41

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Section: The Beer Modelmentioning

confidence: 99%

Section: The Beer Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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A Comparison of the Beer and Penn Effect Models Via Their Applications on the Valuation of the Renminbi

Zhang

2012

SSRN Journal

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“…On the hand, Engle (2006) documents the optimization of pricing model in consideration with the importer's currency's fluctuating exchange rate while local prices are assumed to be stable. Specifically, an appreciation of Chinese currency against the foreign operating currencies would seem to require a dramatic change where chronic overvaluation in China's central planning period, but economic reforms have brought the real exchange rate closer to equilibrium and this reform in effect of exchange rate led to a substantial real depreciation of the Chinese currency after 1981 (Zhang, 2001) though, this claim was further criticized by Coudert and Couharde (2007) and Jiang and Kim (2013) who provide an insights about the possible undervaluation of the Chinese currency in comparison with the other emerging economies.…”

Section: Introductionmentioning

confidence: 99%

Assessing the Exchange Rate Volatility as an External Shock to Chinese Economy

Azimi¹

2016

IJEF

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Theoretically, the rate of exchange is one of the major drivers of inflation that influences the wholesale price index (WPI) in countries where significant emphasis is put over import and export like China. In this paper, the exchange rate's clustering volatility and its impulsiveness as an external shock to WPI is investigated on a set of time series data which represents 4,067 daily observation of Chinese Economy from August 12, 2004-September 30, 2015. The ordinary least square and weighted regression analysis reveal significant p-values of 0.000 for exchange rate that explain the WPI throughout the stated period. The autoregressive conditional heteroskedasticity and generalized autoregressive conditional heteroskedasticity model exhibit significant probability value of 0.000 and 0.044 respectively for WPI and the exchange rate. It is found that the previous days' volatility of WPI influences the future volatility of WPI as an internal shock in addition to the previous days' impulsiveness of the exchange rate which influences the future volatility of the WPI as an external shock. The testing models are thoroughly applied and their stability and validity are evidenced thereto.

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China's new normal and the implications to domestic and global business

Abdul‐Rahaman

Yao

2019

Int. J Fin Econ

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We use a VEC model to analyse China's “new normal” and how they affect aggregate components of China's balance of payment account, which represents China and the rest of the world. We assessed whether the tightening financial conditions impact China's long‐run growth. We also assessed the reduction in savings and its effect on growth. We further assess the claim of increasing net capital flows through a stable currency. We also compute China's currency gains and losses in CFET countries using the approach in and analysed how reducing national savings will impact on currency gains in the FX market. Analysing the fluctuations in capital flows, and its determinants, are significant for the restructuring since the government has undertaken to reduce his participation in direct financing. The research found that the gradual tightening of monetary policy if core inflation continues to pick up will not affect the long run current account growth, whereas reduced savings will have a short‐run adverse effect on growth. These conclusions support the assertion in. Furthermore, the liberalization of the financial systems reduces growth in the short run, whereas the fluctuations in renminbi have no impact on the capital account. We, therefore, do not find evidence of currency stability, aiding and facilitating net capital flows. Also, the decision to tighten policy rates and the effects on the capital account depends on the margin of the change. Lastly, the liberalization reforms will increase currency gains and also trigger currency appreciations.

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Real Exchange Rate Misalignment in China: An Empirical Investigation

Cited by 101 publications

References 18 publications

A Comparison of the Beer and Penn Effect Models Via Their Applications on the Valuation of the Renminbi

A Comparison of the Beer and Penn Effect Models Via Their Applications on the Valuation of the Renminbi

Assessing the Exchange Rate Volatility as an External Shock to Chinese Economy

China's new normal and the implications to domestic and global business

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