Browsing by Subject "Singapore"

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  • Fang, Ying; Huang, Shicheng; Niu, Linlin (2012)
    BOFIT Discussion Papers 2/2012
    We employ Bayesian method to estimate a time-varying coefficient version of the de facto currency basket model of Frankel and Wei (2007) for the RMB of China, using daily data from February 2005 to July 2011. We estimate jointly the implicit time-varying weights of all 11 currencies in the reference basket announced by the Chinese government. We find the dollar weight has been reduced and sometimes significantly smaller than one, but there is no evidence of systematic operation of a currency basket with discernable pattern of significant weights on other currencies. During specific periods, the reduced dollar weight has not been switched to other major international currencies, but to some East Asian currencies, which is hard to explain by trade importance to or trade competition with China. We examine currency baskets of these East Asian Economies, including major international currencies and the RMB in their baskets. We find an evident tendency of Malaysia and Singapore to increase the weights of RMB in their own currency baskets, and a steadily and significantly positive weight of RMB in the basket of Thailand. These evidences suggest that, the positive weights of some East Asian currencies in RMB currency basket during specific periods largely reflect the fact that these East Asia economies have been systematically placing greater weights on RMB under the new regime of RMB exchange rate. Keywords: RMB currency basket, time-varying regressions, East Asia, China, US JEL Classification: F31, F41, C11
  • He, Xinhua; Qin, Duo; Liu, Yimeng (2011)
    BOFIT Discussion Papers 22/2011
    Published in Journal of Chinese Economic and Business Studies, Volume 10, Issue 3, August 2012, Pages 247-266
    The familiar claim of Chinese currency manipulation is generally asserted without reference to empirical evidence. To investigate the legitimacy of the claim, we ask if the undervalued misalignment found in the real effective exchange rate (REER) of the Chinese renminbi (RMB) over the past decade has any recent historical precedents. Four cases are examined: the Japanese yen, the Deutsche mark, the Singapore dollar and the Taiwan dollar. Panel-based misalignment estimates of the REER of the four currencies are obtained using quarterly data from the late 1970s to the early 2000s. Our estimates suggest that there are precedents to the recent misalignment of the RMB in terms of magnitude, duration or breadth of currency coverage, and that a net build-up in foreign asset does not necessarily result in currency misalignment. In addition to finding little empirical justification for the claim of Chinese currency manipulation, we note that REER misalignment runs a risk of propagating inflation in the home economy.