ADBI Dean Naoyuki Yoshino gave a presentation at the People’s Bank of China (PBC) in Beijing on 7 August. During the presentation he examined five approaches to achieving an optimal exchange rate system: continuing a fixed exchange rate arrangement; a gradual introduction of a basket currency system; a sudden change to a basket currency system; moving to a flexible exchange rate system; and moving to a managed floating system. Dean Yoshino went on to say that dynamic analysis of data on the People’s Republic of China (PRC) can lead to an optimal exchange rate system. Based on the value of the loss function, he explained how fluctuations in the PRC’s economy can be minimized through a gradual adjustment to a basket currency system. This adjustment process should be achieved in around four and a half years. Dean Yoshino also added that the optimal deposit insurance premium is calculated using Japanese data and that a dual deposit insurance system will help improve performance of the banking system. It is hoped that the methods demonstrated during the presentation will help the PBC set up its deposit insurance system in the PRC.
People's Bank of China (PBC)