Pitfalls in Measuring Exchange Rate Misalignment : The Yuan and Other Currencies

@inproceedings{Cheung2008PitfallsIM,
title={Pitfalls in Measuring Exchange Rate Misalignment : The Yuan and Other Currencies},
author={Yin-wong Cheung and Eiji Fujii},
year={2008}
}

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, even though the point estimates usually indicate economically significant misalignment. The result is robust to various choices of… CONTINUE READING