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Exchange Rate Policy in China after the Financial Crisis: Evidence from Time-varying Exchange Rate Basket

Publication at Faculty of Social Sciences |
2015

Abstract

We analyze the period of a managed floating exchange rate policy in China between June 2010 and November 2014. We estimate a time-varying structure of a hypothetical currency basket using the Kalman filter.

We show that the exchange rate policy continues to focus on the US dollar. However, its weight has been gradually declining, while this decline has moderated in 2014.

The euro played some role before summer 2011, but became negligible after the outbreak of the European sovereign debt crisis. Finally, the Thai baht has positive implicit weights.