The PPP approach revisited: A study of RMB valuation against the USD
Marielle Hvide and
Serhat Ugurlu ()
Journal of International Money and Finance, 2017, vol. 77, issue C, 18-38
We analyze the alleged undervaluation of the Chinese renminbi against the US dollar through an application of the relative PPP hypothesis, the PPP approach. The PPP approach measures the relative misalignment of a currency by estimating the relationship between log price levels and log per capita real incomes from a cross section of countries. We estimate this relationship by using ICP 2011 and incorporating model selection tests. Our results confirm that price level-real income relationship is best approximated by a quadratic functional form. We show that, using this functional form, the PPP approach does not reveal any evidence of renminbi undervaluation as of 2011, and this result is robust to various sensitivity tests.
Keywords: Renminbi; Currency misalignment; Penn effect (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:77:y:2017:i:c:p:18-38
Access Statistics for this article
Journal of International Money and Finance is currently edited by J. R. Lothian
More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().