BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 20/2007:
The Undisclosed Renminbi Basket: Are The Markets Telling Us Something About Where The Renminbi - US Dollar Exchange Rate Is Going?
Michael Funke ()
and Marc Gronwald ()
Abstract: On 21 July 2005 China adopted an undisclosed basket
exchange rate regime. We formally assess and envisage the gradual evolution
of the renminbi over time. We utilize nonlinear dependencies in the
renminbi exchange rate and describe the smooth transition of the
renminbi/U.S. dollar (RMB/USD) exchange rate using the family of
time-varying autoregressive (TV-AR) models. Specifically, the nonlinear
models allow for a smooth transition from one optimal level to another. Our
estimation results imply that the RMB/USD exchange rate will likely be
about 7.42 RMB/USD in summer/autumn 2008.
Keywords: China; renminbi; de facto exchange rate regime; TV-AR model; TV-AR-GARCH mode; (follow links to similar papers)
JEL-Codes: C22; F31; F37; (follow links to similar papers)
27 pages, November 6, 2007
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