The mystery of the Chinese exchange rate regime: basket or no basket?

Imad Moosa and Larry Li

Applied Economics, 2017, vol. 49, issue 4, 349-360

Abstract: Economists have taken for granted the claim made by the Chinese government that the policy shift introduced in July 2005 constituted a change in the exchange rate regime from a fixed peg to a basket peg. We demonstrate that neither the stylized facts nor the empirical evidence support the proposition of a basket peg and suggest several reasons as to why China has not adopted this regime. The results could prove useful for identifying the Chinese exchange rate regime in the aftermath of the perceived policy shift following the August 2015 devaluation.

Date: 2017
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DOI: 10.1080/00036846.2016.1197370

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