Verifying China's exchange rate regime: It is a discretionary crawling peg to the US dollar!
Journal
International Journal of Trade and Global Markets
Journal Volume
7
Journal Issue
3
Pages
250-270
Date Issued
2014
Author(s)
Abstract
This paper investigates the evolution of China's exchange rate regime after the announced shift to a managed floating exchange rate regime with reference to a basket of currencies in July 2005. We find that the RMB basket is essentially a one currency basket of the US dollar. In view of this finding and that the exchange rate of RMB against the US dollar has been crawling upward in an on–and–off manner and at a slow yet erratic rate after the regime shift, China's current exchange rate regime can best be characterised as a discretionary crawling peg to the US dollar. We suggest that a discretionary crawling peg to the US dollar is the optimal and logical choice for China and it will probably be quite some time before China moves to a freely floating exchange rate regime or only to a managed floating exchange rate regime in the real sense.
SDGs
Type
conference paper