The challenge of choosing an optimal exchange rate regime for China

Abstract

China's renminbi exchange rate has closely tracked the US dollar for over a decade.Although the peg has served the Chinese economy well, the recent depreciation of the US dollar and China's rapid economic development have increased discussion of other possible exchange regime options for China.In this paper, we contribute to the discussion by considering some of the options available to China in the light of recent theoretical and empirical work on exchange rates.Keywords: China, monetary policy, exchange rate regime