Real Exchange Rate Behavior under Peg: Evidence from the Chinese RMB and Malaysian MYR

Yongjian E (), Anthony Yanxiang Gu and Chau-Chen Yang ()
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Yongjian E: Bank of Communications, 188 Central Yincheng Road, Shanghai, 200120, China
Chau-Chen Yang: Department of Finance, College of Management, National Taiwan University 1 Roosevelt Road, Sec. 4, Taipei, Taiwan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2009, vol. 12, issue 01, 141-158

Abstract: The exchange-rate behavior of the Chinese yuan (RMB) and the Malaysian ringgit (MYR) indicates that the real exchange rate volatility of both the pegged currency/the anchor currency (the US dollar), and the pegged currency/the non-anchor currencies (Japanese yen and British pound) are lower under the pegged regime. The dynamic behavior of the pegged currencies' real exchange rates is consistent with the anchor currency as the speed of convergence of the Big Mac real exchange rates of the RMB, MYR, and the dollar against the floating currencies are almost identical during the pegged period. This may be due to similar inflation rate movements in the related economies. These results do not support the opinion that China has manipulated the value of its currency.

Keywords: Pegged exchange rate regime; real exchange rate; anchor currency; non-anchor currency; China; manipulate; JEL Classification: F31; JEL Classification: F41 (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0219091509001587

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