The Renminbi and Poor‐country Growth

Abstract

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A new assessment of the Chinese RMB exchange rate

“…The Penn effect model was originally used in a cross-section data setting (Chang and Shao, 2004;Frankel, 2006) and then used in a panel data setting (Cheung et al, 2007;Garroway et al, 2012). Its panel data specification in this paper is Eq.…”

A Simple Model and its Application in the Valuation of Five Asian Real Exchange Rates

“…Currency valuation, the calculation of the equilibrium exchange rate of a currency, has been a popular topic in international finance from the 1910s to the current times (Cassel, 1916a(Cassel, , 1916bYeager, 1958;Balassa, 1964;Ohno, 1990;Clark and MacDonald, 1998;Takeuchi, 2003;Chang and Shao, 2004;Frankel, 2005;Barisone et al, 2006;Isard, 2007;Wang et al, 2007;Cheung et al, 2010;Subramanian, 2010;Benassy-Quere et al, 2011;Imam and Minoiu, 2011;Sidek et al, 2011;Alper and Civcir, 2012;Garroway et al, 2012;Lopez-Villavicencio et al, 2012;Sato et al, 2012). Currency valuation models are mainly classified as the absolute or relative purchasing power parity (PPP) (Cassel, 1916a(Cassel, , 1916bYeager, 1958;Balassa, 1964;Ohno, 1990;Isard, 2007;Sidek et al, 2011), the Penn effect or Balassa-Samuelson (BS) regression or extended PPP (EPPP) (Takeuchi, 2003;Chang and Shao, 2004;Frankel, 2005;Isard, 2007;Cheung et al, 2010;Subramanian, 2010;Garroway et al, 2012), the behavioral equilibrium exchange rate (BEER) (Clark and MacDonald, 1998;Wang et al, 2007;Benassy-Quere et al, 2011;Imam and Minoiu, 2011;…”

“…Currency valuation models are mainly classified as the absolute or relative purchasing power parity (PPP) (Cassel, 1916a(Cassel, , 1916bYeager, 1958;Balassa, 1964;Ohno, 1990;Isard, 2007;Sidek et al, 2011), the Penn effect or Balassa-Samuelson (BS) regression or extended PPP (EPPP) (Takeuchi, 2003;Chang and Shao, 2004;Frankel, 2005;Isard, 2007;Cheung et al, 2010;Subramanian, 2010;Garroway et al, 2012), the behavioral equilibrium exchange rate (BEER) (Clark and MacDonald, 1998;Wang et al, 2007;Benassy-Quere et al, 2011;Imam and Minoiu, 2011;Sidek et al, 2011;Alper and Civcir, 2012;Lopez-Villavicencio et al, 2012), and the macroeconomic balance or fundamental equilibrium exchange rate models (Clark and MacDonald, 1998;Barisone et al, 2006;Isard, 2007;Imam and Minoiu, 2011;Lopez-Villavicencio et al, 2012;Sato et al, 2012).…”

“…However, there are studies on other relevant topics such as the exchange rate appreciation and the BS effect of the same five Asian countries and areas (Ito et al, 1997), the business cycle and the yen/dollar exchange rate fluctuation in East Asia (McKinnon and Schnabl, 2003), and the exchange rate appreciation and economic growth of Taiwan (Xu, 2008). (3) I exclude the Chinese renminbi (RMB) in my research because of the large number of studies on its valuation (Takeuchi, 2003;Chang and Shao, 2004;Frankel, 2005;Wang et al, 2007;Cheung et al, 2010;Subramanian, 2010;Garroway et al, 2012;Lopez-Villavicencio et al, 2012;Sato et al, 2012). Moreover, Understanding the currency valuation of Asian industrial countries and areas will help Chinese policymakers to make decisions in the future, given that China has been learning from its five industrial neighbors in its development.…”

A Simple Model and its Application in Currency Valuation

“…Following Cheung et al (2010, p.274), I call this the Penn effect model. The Penn effect model's influence is growing；see Cheung et al (2007), Subramanian (2010), Reisen (2010), and Garroway et al (2012).…”