2005/01/01 by Ajay Shah, Achim Zeileis, Shah, Ajay +3
Economics, Econometrics and Finance · #Fiscal Policies and Political Economy #Global Financial Crisis and Policies #Monetary Policy and Economic Impact
paper · pdf · doi:10.57938/8bb70901-637f-4f6a-87dd-8e60d1d0e536
openalex publication_date 2005/01/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/23
The revaluation of the yuan in July 2005 was described by the Chinese central bank as a change in the currency regime, rather than merely a changed level of the exchange rate. The reform was said to involve a shift away from the fixed exchange rate, a gradual movement towards greater flexibility, and a peg to a basket of currencies. This paper closely examines the post-July Chinese currency regime utilising contemporary ideas in the econometrics of structural change. We find that the yuan has remained pegged to the US dollar, rather than to a basket, and has extremely limited currency flexibility. We find no evidence of structural change in the post-July period, which suggests that there has been no evolution towards greater flexibility. We show a monitoring procedure which will detect future evolution of the currency regime.