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On China’s Exchange Rate Regime: Is Euro outside?

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This study will demonstrate, through an econometric model in time series, if and how the Chinese basket peg has changed in relation to the weight that the European currency holds within it. Specifically, utilizing Frankel’s (1994) econometric model but revisited new approach enriched by Hildreth-Lu’ method, our objective is to verify if the Eurozone crisis has affected the inner balance of the Chinese basket-peg, swaying it from the Euro towards a more favorable dollar. Finally we find an evident tendency of Dollar and South Korea Won to increase the weights in Chinese basket peg with a clear deterioration of the euro role
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