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臺大管理論叢
第
27
卷第
2
期
89
where Δ stands for the difference,
e
rc
is the log of the exchange rate of the regional
currency,
e
i
is the log of the exchange rate of anchor currency
i
, all exchange rates are in
price term (currency
i
per unit of numeraire),
t
stands for time and
ε
t
for residuals. The
estimated coefficient
w
i
is inferred as the weight of anchor currency
i
in the currency basket.
On the other hand, Yamazaki (2006) and Fidrmuc (2010) propose the following specification
in levels:
(2)
where the same notations apply and the estimated coefficient
w
i
is inferred as the weight
of anchor currency
i
.
Are both of these two specifications correct in allowing one to infer the weights of the
anchor currencies using the estimated coefficients? Moreover, are the exchange rates to be
expressed in quantity term or price term? In this paper, we show by a simple model that to
estimate the weights of the anchor currencies, the correct specification is to use the rates of
change in exchange rates and to write exchange rates in quantity term. We then construct our
estimation equation to infer the weights of the component currencies in the RMB basket in a
way that is consistent with our model and avoid model mis-specification problems in
estimation. Furthermore, we construct our estimation equation as a state space model. By
using the state space modeling, we can utilize all the sample information.
Findings
The behavior of the exchange rate of USD/RMB after July 2005 clearly demonstrates
that China has abandoned the fixed peg to the US dollar after the announced regime change.
The gradual appreciation of the RMB against the USD after the announced regime change is
not a mere reflection of the depreciation of the USD against other currencies in general.
Rather, it reflects China’s policy to revalue its currency against the US dollar in a
controllable manner. An examination on the volatility in the exchange rates of RMB against
the USD and the non-dollar currencies in the RMB basket indicates the USD/RMB exchange
rate is far more stable than the exchange rates of the RMB against the non-dollar currencies
in the RMB basket, which suggests that the RMB is linked to the US dollar much more
closely than to the non-dollar currencies.
On the whole, the exchange rate behavior indicates that China has allowed the exchange