Exchange Rate Regime Verifi cation: Has China Actually Moved from a Dollar Peg to a Basket Peg? Peg?

Imad Moosa, Tony Naughton and Larry Li
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Imad Moosa: Monash University
Larry Li: RMIT University

Economia Internazionale / International Economics, 2009, vol. 62, issue 1, 41-67

Abstract: An attempt is made to verify the exchange rate regime that China has been following since 21 July 2005 when a policy shift was implemented, presumably taking China from a dollar peg to a basket peg. The results show that while a regime of simple and strict dollar peg has indeed been abandoned, the evidence does not support the proposition that the current exchange rate regime is a basket peg. It is suggested, based on the empirical results, that the current Chinese regime is some sort of a discretionary crawling peg against the U.S. dollar. It is argued that this regime is consistent with the Chinese objectives of maintaining a competitive advantage while avoiding a trade war with the U.S.

Keywords: China; Exchange Rate Regime Verification; Basket Peg; Crawling Peg (search for similar items in EconPapers)
JEL-codes: F31 F33 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (3)

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