Research On The Relationship Between The RMB Real Exchange Rate And Economic Growth In The Context Of The Global Value Chai

The current complex and severe economic situation poses a challenge to China’s participation in Global Value Chain production.In the past 30 years,Global Value Chain has been an important driver of global economic growth and economic globalization.After the reform and opening up,China relied on its labor endowment advantages and embedded the global division of labor system through the development of processing trade,which greatly promoted the growth of trade(Wen and Xian,2009).Nowadays,the external environment is complex and unstable.So as to build the new development pattern with the domestic cycle as the mainsta,one of the three policy pillars is the flow of factors and regional integration.And the process of localization and regionalization of the value chain will accelerate.The impact of the process on China’s economy,and why joining the Global Value Chain has economic significance to China are both what we care about.After that,we may make effective and reasonable responses to the current situation.In the long run,economic globalization is still a historical trend,and the real exchange rate is embodied in a country’s external competitiveness,which has an endogenous relationship with a country’s economic growth that is mutually causal.The exchange rate,as the price of a currency,will affect the cost and income of enterprises through the relative price changes of domestic and foreign products in trade.And in this process,it has an asymmetric impact on industries with different demand income elasticities(the ratchet effect),which in turn affects the industrial structure and even the national economic growth;economic growth brings consumption growth and business investment,and changes the demand for foreign products and services,which in turn causes exchange rate changes.At the same time,there is a trade-off between exchange rate and economic growth in many aspects such as the import of input and the introduction of foreign direct investment.Under the division of labor in Global Value Chain,traditional research on the relationship between real exchange rates and economic growth is facing new challenges.The division of labor in the Global Value Chain has put a new question on the relationship between China’s real exchange rate and economic growth.What role does Global Value Chain play in the relationship between exchange rate and economic growth? Will joining Global Value Chain production make trading companies face higher exchange rate risks? What is the impact of joining Global Value Chain production on China’s economy? These topics that have not been fully explored in traditional research on the relationship between real exchange rates and economic growth are worthy of re-examination and analysis under the conditions of the emergence of new methods and new data.This article uses three dimensions of country-level,industry-level,and firm-level data to study the relationship between real exchange rates and economic growth,and incorporates Global Value Chain indicators calculated based on the I-O table in the research to further distinguish heterogeneity among the country-level real effective exchange rate to real GDP,the industry-level B-S effect,and firm-level real exchange rate to firm’s real gross output and R&D expenditure caused by different Global Value Chain position,participation,and embrace.The main research conclusions are as follows:First,the real effective exchange rate depreciation can promote China’s economic growth in the short term,but it is not conducive in the long run.In the impact of the short-term SVAR impulse response function,this paper finds that the real effective exchange rate depreciation can promote economic growth in the short term,and economic growth has a weak ability to determine the exchange rate;the real effective exchange rate level and the GVC position promote each other and spiral upward;the real effective exchange rate appreciation increases the degree of GVC embrace and participation,and promotes China’s participation in Global Value Chain production with high foreign value-added rates,thereby promoting China’s economic growth in the long run.Therefore,although the real effective exchange rate depreciation can significantly promote my country’s economic growth in the short term,its negative impact on GVC indicators is not conducive to my country’s long-term economic growth.Second,the B-S effect between China and the United States is established,but the traditional transmission channel is not.This paper decomposes the real exchange rate into terms of trade,double relative productivity,double relative wages,etc.,using subsectoral service industry data to empirically test the traditional transmission channel of“double relative productivity-double relative wages-real exchange rate”.The result shows that double relative productivity has a positive(devaluation)effect on real exchange rate,which means the B-S effect between China and the United States is established.The increase in double relative productivity will increase double relative wages,but the increase in double relative wages cannot be transmitted to the positive impact on the real exchange rate.The mediation effect test results also prove that double relative wages are not a mediating variable of double relative productivity to the real exchange rate,that is,the traditional transmission channel of the B-S effect between China and the United States is not smooth.Third,there is a transmission channel of "double relative productivity-relative GDP-real exchange rate" between China and the United States.This paper incorporates the monetary exchange rate model into the real exchange rate decomposition.It is concluded that the real exchange rate will also be affected by relative money supply and relative GDP.The empirical results of incorporating relative GDP into the B-S effect test show that the increase in double relative productivity has a negative effect on relative GDP.And its negative impact on the relative GDP will be transmitted to the positive impact on the real exchange rate.The test result of the mediation effect proves that the mediation effect exists,that is,there is a transmission channel where the double relative productivity between China and the United States affects the relative GDP,which in turn affects the real exchange rate between China and the United States.Fourth,as the service industry is increasingly developing into a tradable product sector,the improvement of the GVC position of the service industry can also boost a country’s competitiveness.This paper constructs the relative GVC position index of the service industry relative to the manufacturing industry and China relative to the United States.The index and its interaction with relative productivity are added to the B-S effect test empirical model.The empirical results show that in the production service industry group,the coefficient of the interaction term of double relative productivity and relative productivity is opposite to that of double relative productivity,that is,the positive(depreciation)effect of the increase of relative productivity on the real exchange rate weakens as the position of double relative GVC increases.Fifth,the increase in GVC position will reduce the exchange rate risks faced by enterprises.This paper uses the combined data of industrial enterprises data,and customs data to calculate the real effective exchange rate of export,import and trade weighted at the firm level,and examines the impact of the real effective exchange rate and GVC indicators on the real gross output of the enterprise.The results show that the actual effective exchange rate of export and trade-weighted enterprises have negative impacts on pure export,pure import and trading companies respectively.And the import-weighted firm-level real effective exchange rate has significantly reduced the negative impact on companies after controlling subsidy and input;but all companies show that the increase in GVC position Weaken the negative impact of the appreciation of the company’s real effective exchange rate on the actual output,that is,the increase of the GVC position can reduce the exchange rate risk faced by the company.Sixth,the increase in GVC participation and embrace significantly increase corporate R&D expenditures.The empirical research results of the effect of firm-level real effective exchange rate on enterprise R&D expenditure show that whether pure export,pure import or trading enterprise,the increase in GVC participation and embrace significantly increase enterprise R&D expenditure.The impact of rising or falling exchange rates on corporate R&D expenditures is heterogeneous,importweighted real effective exchange rate’s appreciation in pure import enterprise will weaken the negative impact of the increase of GVC position on corporate R&D expenditure,and weaken the positive impact of the increase of GVC embrace on corporate R&D expenditure;the appreciation of the trade-weighted real effective exchange rate of trading companies will weaken the negative impact of the increase of GVC position on corporate R&D expenditure Impact: The appreciation of the exportweighted real effective exchange rate of pure export enterprises has no effect on the R&D expenditure of enterprises.The above conclusions have the following policy implications: first,stabilize economic fundamentals,and ensure that the RMB exchange rate floats freely within a reasonable and balanced range;second,encourage companies to participate in the production of global value chains in high-tech industries;third,improve the level of the service industry development;Fourth,promote the development of high-end manufacturing with innovation and enhance international competitiveness.The mainly possible innovations of this paper are as follows:First,use country-,industry-,and firm-level data to systematically and comprehensively examine the relationship between real exchange rates and economic growth included in the Global Value Chain.This papar uses three dimensions of country-,industry-,and firm-level data to study the relationship between real exchange rates and economic growth,and incorporates Global Value Chain indicators calculated based on the I-O table in the research to further distinguish heterogeneity among the country-level real effective exchange rate to real GDP,the industry-level B-S effect,and firm-level real exchange rate to firm’s real gross output and R&D expenditure caused by different Global Value Chain position,participation,and embrace.Second,relax the two major assumptions of the B-S effect at the same time,and verify the B-S effect between China and the United States using the real exchange rate data of the service industry sub-sectors,while also verifying traditional channels and new fundamental channels.Domestic related studies either only verify the B-S effect or only release a single hypothesis to verify,and it does not meet the simultaneous existence of China’s traded goods deviation from LOP and incomplete labor market;the literature only stays on the basis of whether a country meets B-S effect,and there is no verification of the transmission channels of the B-S effect.