## Estimating China's "Equilibrium" Real Exchange Rate

_IMF Working Papers, October 1, 2005_

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## Bibliographic details
- Authors: Xiangming Li, Steven V Dunaway
- Published: October 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451862218.001

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### Summary
- The number of studies attempting to estimate the "equilibrium" real value of China's currency has proliferated in recent years as the country's presence in world markets has grown.
- These studies seek to establish whether a significant part of China's competitive prowess can be attributed to the foreign exchange value of the renminbi.
- No consensus has emerged because the studies yield a very wide range of estimates.

### Key findings
- Sampled studies produce estimates of undervaluation ranging from zero to nearly 50 percent.
- The wide variation in estimates is attributed to multiple influences:
  - different methodologies used;
  - explanatory variables included;
  - subjective judgments of the various researchers in deriving their results;
  - instability in underlying economic relationships, especially in a rapidly developing economy like China.

### Analytical focus and concepts
- Primary analytical themes and technical terminology preserved from the source:
  - Balance of payments
  - Current account balance; current account position
  - Exchange rate adjustments; Exchange rates; nominal exchange rate; Real exchange rates
  - Foreign exchange
  - Purchasing power parity; PPP approach; PPP equation; purchasing power parity method
  - Balassa-Samuelson effect
  - CPI; PPI; PPI ratio
  - Equilibrium exchange rate

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/estimating-china-s-equilibrium-real-exchange-rate-18614_