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dc.contributor.authorSu, Tingtingen
dc.date.accessioned2009-06-30T23:22:15Z
dc.date.issued2009en
dc.identifier.urihttps://hdl.handle.net/10182/1106
dc.description.abstractThe question of an equilibrium exchange rate has always been a debatable issue. Along with rapid growth of the Chinese economy over the past two decades, a number of studies have been undertaken to investigate whether or not the RMB exchange rate is at its long run ‘equilibrium’ level. Because the equilibrium exchange rate affects the competitiveness of a country’s economy, these studies have focused on whether or not the real exchange rate is misaligned with respect to its long-run equilibrium level. One of the main reasons for this concern is that effective management of the exchange rate system could help a country’s economy achieve internal and external balance. Otherwise, it could negatively influence the stability of a country’s financial economy, possibly resulting in regional financial crises. This study estimates time varying values of the equilibrium real effective exchange rate (EREER) and associated exchange rate misalignments for China in recent years (from the first quarter of 1999 to fourth quarter of 2007). The study focuses on the reduced-form equilibrium real exchange rate (ERER) model for developing countries presented by Elbadawi (1994) and follows Edwards’ (1989, 1994) work on models of exchange rate determination. We identify the terms of trade, openness, government expenditure, productivity, and money supply as important explanatory variables of the RMB long-run equilibrium value. We use the Johansen-Juselius (1990) co-integration procedure to analyse our data. Using the ERER model, our results show there is a cointegrating relationship between the real effective exchange rate and its economic fundamentals. Subsequently, compare to other previous studies discussed in Chapter 2, our restricted error-correction model suggests that the extent of the misalignment is not very large, moving in a narrow band of plus and minus 12 percent of the long-run equilibrium level during the sample period. Focusing on the RMB real exchange rate misalignment in recent years, our result shows that the RMB was undervalued by an average of 6.7 percent during the period of 2005Q:3-2007Q:4. Furthermore, our short-run empirical error correction model indicates that, on average, the real exchange rate takes over one quarter to reach its long-run equilibrium level.en
dc.format.extent1-85en
dc.language.isoenen
dc.publisherLincoln Universityen
dc.subjectmisalignmentsen
dc.subjecterror correction modelen
dc.subjectequilibrium exchange rateen
dc.subjectreal effective exchange rateen
dc.subjectcointegrationen
dc.subjectHodrick-Prescott decompositionen
dc.subjectRMBen
dc.titleAn empirical analysis of China's equilibrium exchange rate : a co-integration approachen
dc.typeThesis
thesis.degree.grantorLincoln Universityen
thesis.degree.levelMastersen
thesis.degree.nameMaster of Commerce and Managementen
dc.subject.marsdenFields of Research::350000 Commerce, Management, Tourism and Servicesen
dc.subject.marsdenFields of Research::340000 Economicsen
lu.contributor.unitLincoln Universityen
lu.contributor.unitFaculty of Agribusiness and Commerceen
lu.contributor.unitDepartment of Financial and Business Systemsen
pubs.organisational-group/LU
pubs.organisational-group/LU/Faculty of Agribusiness and Commerce
pubs.organisational-group/LU/Faculty of Agribusiness and Commerce/FABS
pubs.publication-statusPublisheden
dc.publisher.placeChristchurchen


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