| Chinese Policy makers started the reform of the RMB exchange rate regime in July 2005. Since then, RMB has experienced substantial appreciation against the U.S. dollar. The exchange rate plays an important role in adjusting the international economy. Its changes affect the trade sector’s profitability and competitive landscape and inevitably have an impact on the innovation and operation of relevant enterprises and institutions. This thesis researches the impact of RMB exchange rate’s adjustment on endogenous technological progress driven by enterprises. It offers insights into micro mechanisms of exchange rate’s real effects and provides guidance for policies concerning the exchange rate regime reform and the economy upgrading.The concept of "Technological Progress" in this thesis is defined from a broad perspective, including breakthroughs in the fields of science and technology (the narrowly defined technological progress) as well as improvements in management and operations. And the essence of "Technological Progress" is understood as the enhancement of economic efficiency. This research consists of both theoretical and empirical analysis. In the theoretical part, exchange rate’s effects on the enterprises’ technological and managerial efforts are analyzed on macro, industry and micro levels. In the empirical part, expenditure on scientific and technological activities is used to measure inputs for technological progress while total factor productivity (TFP) is used to measure the outputs and effects. These studies constitute a comprehensive understanding of the issue.Chapter Three explores on the macro level how the changes of exchange rate affect the flow and relocation of resources between different sectors, and therefore affect the speed of technological progress. A general equilibrium model containing a high-tech tradable sector and a low-tech non-tradable sector is constructed, with endogenous technological progress. It proves that:due to the presence of a low-tech non-tradable sector, the appreciation will lead to the slow down of technological progress and economic growth. If the low-tech non-tradable sector’s capability of absorbing human capital is great, the adverse impact is particularly significant.Chapter Four analyzes exchange rate’s effect on technological progress of the tradable sector from the industry and micro level. Models are constructed to analyze Enterprises’s technology adoption decisions and equilibrium R&D strategies. It is proved that:under modest appreciation, if there is polarization within the industry, the survival of the fittest mechanism will come into play, which tends to improve technological progress in the long run. Moreover, China’s huge market and large potential demand could help ease the adverse impact. And increased imports of advanced equipments, following appreciation could act as a favorable incentive for technological progress. It is proved that the survival of the fittest mechanism comes into play, which tends to improve technological progress in the long run. Finally, an analysis shows that modest appreciation encourages the export firms’ management innovation in improving production efficiency.Chapter Five starts the empirical part of the thesis. Comparative analysis is carried out using the time series of real per capita GDP growth and real effective exchange rate from 1981 to 2010, of Japan, Germany and China. It proves that Germany’s economy was free from the impact of appreciation, because of its balanced economy structure; Japan’s economy experienced large fluctuations; while China’s fluctuation was relatively moderate yet persisted longer.Chapter Six uses China’s industrial panel data from 1998 to 2007 for empirical analysis. It is found that:when the RMB real effective exchange rate increases by 1%, the total factor productivity index declines by 0.021%, where its one component, the technological progress index, increases by 0.076%, and the other component, the technological efficiency index, declines by 0.079%. The appreciation leads to increased capital intensity, which acts as the most prominent channel promoting technological progress. Moreover, the appreciation encourages enterprises to carry out R&D while inhibits foreign direct investment. These are also important promoting channels. One the other hand, the proportion of state-owned enterprises tends to increase under appreciation and harms technological progress most seriously.Chapter seven does empirical analysis using data of listed firms from 2006 to 2011. It is found that, the real appreciation of RMB significantly promotes the R&D intensity of the sample export enterprises and contributes to higher technological progress. Meanwhile, the appreciation encourages the sample firms to improve technical efficiency through management innovation. In general, the appreciation produces a significant positive impact on the sample’s total factor productivity.In summary, RMB appreciation makes the non-tradable sectors (enterprises) attracting more resources, which helps in maintaining economic stability. However, because the non-tradable sector’s technology level is relatively low, such relocation decreases technological progress on the macro and industrial level. On the other hand, moderate appreciation causes the survival of the fittest effect. And the increased purchasing power favors the imports of advanced equipments. These encourages good enterprises to improve R&D as well as management, therefore benefits technological progress.The conclusions of this research provide inspirations and guidance for China’s exchange rate policies as well as supporting policies. It is suggested that the exchange rate policis should take the real economy into consideration. RMB should avoid fast and sharp appreciation, which might hurt the economy. However, proper and moderate appreciation may benefit the competitiveness of enterprises and spread from the tradable sector to the whole economy. Further perfection of the market mechanism is also needed for the economy’s upgrading in the context of appreciation.
|
PDF Full Text Request