Exchange rate misalignments: Historical experience of Japan, Germany, Singapore and Taiwan compared to China today

This is a comparative study on the historical experience of real effective exchange rate (REER) misalignment of Japanese yen, Deutsche mark, Singapore dollar and Taiwan dollar, with regard to the recent dispute over the Renminbi (RMB) valuation. Panel-based misalignment estimates of the four economies show that net foreign asset build-up does not necessarily result in currency misalignment, and the recent misalignment of RMB is not unprecedented in terms of magnitude, duration or currency coverage, whereas volatility in REER misalignment is likely to propagate to inflation of the home economy concerned. The assertion of 'RMB rate manipulation' thus lacks empirical support.