Currency Substitution, Monetary Independence, and Real Exchange Rate Dynamics

Project Details


An increase in the importance of RMB (Renminbi, the Chinese currency) in Taiwanese’s portfolio along with the expectation of increased RMB volatility and loosened capital control in China due to admission to the SDR (Special Drawing Right) currency club complicates the physical environment faced by Taiwan. In particular, whether the RMB and the US dollar exhibit complementarity or substitutability should be taken into account in evaluating the effectiveness and independence of the CBC’s (the Central Bank of the Republic of China (Taiwan)) monetary policy. In addition, the dynamic adjustment path of relevant macroeconomic variables such as real exchange rate is examined with consideration of currency substitution. We construct a dynamic general equilibrium model with currency substitution to study these issues
Effective start/end date1/08/1631/12/17

UN Sustainable Development Goals

In 2015, UN member states agreed to 17 global Sustainable Development Goals (SDGs) to end poverty, protect the planet and ensure prosperity for all. This project contributes towards the following SDG(s):

  • SDG 8 - Decent Work and Economic Growth
  • SDG 17 - Partnerships for the Goals


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