Working Paper: NBER ID: w12850
Authors: Yinwong Cheung; Menzie D. Chinn; Eiji Fujii
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 to various choices of country samples and sample periods, as well as to the inclusion of control variables.
Keywords: Renminbi; Undervaluation; Exchange Rate Misalignment
JEL Codes: F3; F4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| RMB undervalued (F31) | predicted equilibrium level (C62) |
| RMB undervalued (F31) | statistical significance weak (C12) |
| RMB undervalued (F31) | uncertainty surrounding misalignment (D80) |