No 2005 – 01 January

Real Equilibrium Exchange Rate in China
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Virginie Coudert Cécile Couharde

Real Equilibrium Exchange Rate in China
_____________

Virginie Coudert Cécile Couharde

No 2005 – 01 January

Real Equilibrium Exchange Rate in China

TABLE OF CONTENTS
REAL EQUILIBRIUM EXCHANGE RATE IN CHINA SUMMARY ...............................................................................................................................4 ABSTRACT ..............................................................................................................................4 RÉSUMÉ ..................................................................................................................................5 RÉSUMÉ COURT ......................................................................................................................5

1. 2.

INTRODUCTION.................................................................................................................6 IS THE RENMINBI MISALIGNED ?......................................................................................8

2.1 2.2 2.3 2.4 2.5 3.

The usual « suspects » .............................................................................................8 The Balassa effect..................................................................................................10 Cross-section estimations ......................................................................................12 Panel data estimations ...........................................................................................15 Why is there no Balassa effect at work in China ? ................................................19

FURTHER INVESTIGATIONS WITH FEERs .......................................................................20

3.1 The theoretical framework.....................................................................................20 3.2 The resolution method