Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57954
Authors: 
Cheung, Yin-Wong
Year of Publication: 
2012
Series/Report no.: 
CESifo working paper: Monetary Policy and International Finance 3797
Abstract: 
Assessing exchange rate misalignment is not an easy task. With reference to the debate on the value of China's currency, the renminbi (RMB), this article highlights a few challenges in properly assessing the extent of currency misalignment. The results derived from the fundamental equilibrium exchange rate (FEER) approach and the Penn effect regression are used to illustrate the sensitivity of misalignment estimate to assumptions of the key parameters in a given model, sampling uncertainty, serial correlation adjustment, and data revision. It is shown that both the sign and the magnitude of a misalignment estimate could be dramatically affected by these factors.
Subjects: 
FEER
Penn effect
sampling uncertainty
serial correlation
data revision
JEL: 
F31
F41
Document Type: 
Working Paper

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