Insights from Economics - Assignment Example

Lastly, when compared with the Euro, the RMB was overvalued the entire 2005, then was undervalued in 2006 onwards.Chinese Yuan compared with the Japanese Yen. Table 1: Reference Exchange Rate (RER) of Remnimbi vs. Japanese Yen (National Bureau of Statistics of China 2010)Using the reference exchange rate, we can see that, the value of the RMB vs. the Japanese has increased by about 47.65% from its 2006 while it has decreased by 2% from its original value in 2005. One will remember that the RMB was still pegged to the USB in 2005, hence, one may say that the Chinese Yuan was still undervalued at the time, as proven by the balance of payments approach presented in the previous sections.

Meanwhile, it is not appropriate to compare the Yuan with the Yen using the international trade parity since published data are typically in U.S. Dollars.