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The tremendous success of China's program of economic reform and the rapid integration of China into the global economy have prompted this study on the economic and financial integration between mainland China, Hong Kong, and Taiwan -- a grouping sometimes referred to as Greater China.
Monetary unions --- Hong Kong (China) --- Taiwan --- China --- East Asia --- Economic conditions --- Foreign economic relations --- Economic integration.
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We evaluate whether the Renminbi (RMB) is misaligned, relying upon conventional statistical methods of inference. A framework built around the relationship between relative price and relative output levels is used. We find that, once sampling uncertainty and serial correlation are accounted for, there is little statistical evidence that the RMB is undervalued. The result is robust to various choices of country samples and sample periods, as well as to the inclusion of control variables.
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