Determining the RMB Exchange Regime

Although China has claimed since 2005 that it will move towards a more market-oriented system of managing its foreign exchange, it has remained, in part, a managed economic system. This chapter examines the relative importance of fundamentalist, chartist and currency arrangements in determining the RMB exchange regime using both traditional linear and non-linear artificial intelligence models. We find that the emphasis on the US dollar as a reference currency has declined. Fundamentalist forces are becoming strong determinants of the currency exchange. The genetic programming approach is among the best performing in minimizing forecasting error.