Why the renminbi might be overvalued (but probably isn’t)

Yin-Wong Cheung, Menzie Chinn and Eiji Fujii

Proceedings, 2005

Abstract: The Renminbi (RMB) is evaluated using relative PPP, absolute PPP, and Balassa-Samuelson criteria. We find that some approaches imply substantial undervaluation of the RMB, while others imply little or none. Yet a few others indicate slight overvaluation. However, even when the estimated degrees of undervaluation are large, the gap between predicted and actual values is not always statistically significant. We also find that including measures of institutions, such as the absence of corruption, results in smaller estimates of RMB undervaluation.

Date: 2005
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