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N° 2005-01 |
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| January 2005 |
| Real Equilibrium Exchange Rate in China |
Virginie Coudert
Cécile Couharde |
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| In this paper, we try to measure the size
of a possible misalignment in the Chinese real exchange rate by two ways. On one
hand, we address the issue of the “Balassa effect”, by which the real
exchange rate of a catching-up country should appreciate. We compare China with
other emerging countries, in order to assess the size of a “normal”
“Balassa effect”. On the other hand, we follow the Fundamental Equilibrium
Exchange Rate (FEER) approach. We use the National Institute Global Econometric
Model (NIGEM) for representing the foreign trade of China, the United States,
the Euro area, South Korea and Japan. We calculate the real effective exchange
rate that is consistent with sustainable current accounts. Both methods yield
an undervaluation of the renminbi. |
Abstract |
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| Renminbi; Balassa effect; BEER; FEER |
Keywords |
| F31; F33 |
JEL classification |
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