LAUSR

Due to the productivity shocks, there exist inherently systemic biases when using purchasing power parity as the equilibrium real exchange rate measure standard. In this paper, based on the characteristic of Chinese economic transformation, considering demographic and weakened Balassa–Samuelson effect, we reestimate the equilibrium level of the real exchange rate of RMB with the quarterly frequency data since 1994 and measure the misalignment of the RMB real exchange rate. The empirical results show that the improved convolutional neural network (CNN) model is a reasonable analytical framework for the RMB equilibrium real exchange rate, and in the sample period, the real exchange rate of RMB is robust, and demographic is an important variable affecting the RMB equilibrium exchange rate. The real exchange rate of RMB is closely related to China's economic development strategy.