| The construction of an ecological civilization is a millennium plan for the sustainable development of China.Since the 18 th National Congress of the Communist Party of China(CPC National Congress),the CPC Central Committee,led by Comrade Xi Jinping,has attached great importance to the construction of an ecologically sound civilization.To that end,a series of fundamental,pioneering and long-term projects have been conducted,making historic changes worldwide to promote ecological and environmental protection.At present,China s construction of an ecological civilization is currently in a crucial phase.It can be said that the environmental situation remains grim and not many are optimistic about the future of the environment.At the same time,China s economic growth is at the stage of ‘the three-period superimposed.The gross domestic product growth rate declined from10.6% in 2010 to 6.6% in 2018,and the stable growth path of the macroeconomy has not yet formed.How to coordinate the relationship between ecological environment protection and economic stability and development is particularly important.Therefore,it is theoretically and practically significant to study the relationship between environmental regulation and business cycle fluctuation,thus providing the government with reasonable environmental regulatory policies and maintaining stable economic development.This paper is based on research ideas regarding ‘literature review,mechanism analysis,empirical demonstration and policy proposal.Few existing studies have incorporated environmental regulation and business cycle fluctuation into a unified analytical framework.In particular,there is no unified theoretical framework or empirical research on the direct and indirect effects of environmental regulation on business cycle fluctuation.However,foreign direct investment(FDI),industrial structure upgrading and technological innovation are three significant factors that influence fluctuations in the business cycle and are important ‘bridges for the exploration of the relationship between environmental regulation and business cycle fluctuation.By seeking key intermediate variables,this paper systematically expounds on the transmission mechanism through which environmental regulation is affecting economic cycle fluctuation,thus discovering that environmental regulation affects economic cycle fluctuation through its influence on FDI,and its upgrading ofindustrial structure and promotion of technological progress.First,environmental regulation may impact business cycle fluctuation by influencing the FDI derived from different sources;therefore,the impact of various environmental regulatory policies on FDI and business cycle fluctuation is heterogeneous.Second,environmental regulation acts on the business cycle fluctuation by influencing the upgrading of industrial structure,so there is a threshold effect on the upgrading of industrial structure and economic cycle fluctuation.Third,the implementation of environmental regulatory policies directly affect enterprises investment decisions regarding technological innovation,further influencing business cycle fluctuation.In addition,different types of environmental regulatory policies have diverse impacts on the technological innovation effect of enterprises as well as the shock effect of economic cycle fluctuation.To further examine the direct and indirect effects of environmental regulation on economic cycle fluctuation,this paper performs an empirical analysis comprised of the following aspects.First,based on the provincial-level panel data from 2003 to 2016,environmental regulations are divided into command-control,economic-incentive and voluntary-consciousness types.The dynamic spatial panel model is used to test the direct impact mechanisms of environmental regulation on economic cycle fluctuation and FDI s indirect impact mechanism.The research demonstrates that the command-control type of environmental regulation has no significant influence on economic cycle fluctuation and that there is an inverted ‘U-shaped relationship between the economic-incentive and voluntary-consciousness types of environmental regulations and economic cycle fluctuation.Enhancements of the command-control and economic-incentive types of environmental regulations have no obvious anti-driving effects on investment in Hong Kong,Macao and Taiwan—all regions with lower environmental standards,which cannot slow down economic cycle fluctuations;while the enhancement of the economic-incentive and voluntaryconsciousness types of environmental regulations is conducive to attracting clean foreign investment from other regions,helping control environmental pollution and smoothing economic cycle fluctuations.Second,with 35 of China s industrial sectors between 2003 and 2016 as the research object,the dynamic panel threshold technique was applied to conduct a nonlinearity test on the direct effects of environmental regulation and economic cycle fluctuation as well as the upgrading effect of industrial structure.It was discoveredthat an inverted ‘U-shaped relationship between environmental regulation and economic cycle fluctuation exists.The cross term between the rationalization or optimisation of industrial structures is significantly negative,indicating that the enhancement of environmental regulations is conducive to promote the upgrading of industrial structures and a decline in economic cycle fluctuation.The coefficients of rationalization and optimization of the industrial structures are significantly negative,indicating that the upgrading of industrial structures in both forms is conducive to slowing down the economic cycle fluctuation.Because environmental regulation has a technical innovation threshold for industrial structure upgrading and economic cycle fluctuation,strengthening environmental regulations might smooth out the economic cycle fluctuation by promoting the rationalization or optimization of industrial structures after the threshold value of technical innovation is raised.Third,the data of 443 listed Chinese companies from between 2003 and 2016 was used to analyze the impact of different types of environmental regulation on the enterprises technological innovation and business cycle fluctuations using the panel instrumental variable method.This study demonstrates that the impact of the command-control type of environmental regulations on income fluctuation is not obvious.The results showed there is no non-linear relationship and both of the economic-incentive and voluntary-consciousness types of environmental regulations have an inverted ‘U-shaped relationship with income fluctuation.Besides,the command-control type of environmental regulations exhibits a restraining effect on technological innovation and aggravates income fluctuation;the economic-incentive type of environmental regulations stimulates technological innovation and reduces income fluctuation;the incentive effect of voluntary-consciousness type of environmental regulation on the technological innovation of enterprises has not been fully exerted yet.Furthermore,the influence of these three types of environmental regulations on profit fluctuation is the same as their effects on the income fluctuation,only with different inflection point values,indicating that the estimated conclusions are robust.To sum up,this paper examines the following three aspects of innovation:(1)Innovation from a research perspective.Although the literature on environmental regulation and economic growth in China is legion,there are few studies on environmental regulation and economic cycle fluctuations.In this paper,environmental regulations and economic fluctuations are brought into a unified analysis framework,and their relationship is tested on the regional,industrial leveland enterprise microcosmic levels.(2)Innovation in theoretical analysis.No literature systematically summarises the transmission mechanism by which environmental regulation affects economic cycle fluctuations.This paper explores the specific path of environmental regulation affecting business cycle fluctuation and systematically expounds the action mechanisms of environmental regulations that impact business cycle fluctuation vis-à-vis FDI,upgrading of industrial structures and technological innovation.Simultaneously,the measurement technique is used to test the transmission mechanism of environmental regulation affecting economic cycle fluctuation to provide the theoretical basis.(3)Innovation in empirical methods.When examining the transmission path of environmental regulations affecting the FDI and economic cycle fluctuations,the spatial effect,dynamic effect and endogeneity of environmental regulations are all considered,and the dynamic spatial panel model is used to make estimates.The dynamic panel threshold technique is used when studying the transmission path of environmental regulations that affect the upgrading of industrial structures and economic cycle fluctuations.when examining the transmission path of environmental regulations impacting the technological innovation and economic cycle fluctuations,the panel instrumental variable method is used to solve the endogeneity problem and obtain a robust estimation result.Based on the above theoretical analysis and empirical test results,this paper concludes the following.China should further strengthen the environmental regulation by constructing the ecological environment protection and governance system of "multiple co-governance",adhering to and improving the system construction of ecological civilization,and effectively using environmental regulation tools and other means.At the same time,government should promote high-quality economic development by introducing high-quality green foreign investment,promoting the rationalization and advanced development of industrial structure,and promoting the innovation of green technology,so as to realize the win-win situation of environmental protection and stable economic development. |
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