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The Analyses Of The Relationships Amone China's Foreign Trade, Foreign Direct Investment And Real Exchange Rate Of RMB

Posted on:2008-10-11Degree:MasterType:Thesis
Country:ChinaCandidate:J ChenFull Text:PDF
GTID:2189360215491026Subject:International Trade
Abstract/Summary:PDF Full Text Request
The relationships among Trade flows, foreign direct investment (FDI) and exchange rate largely form a picture of current account ,capital and finance account and exchange rate's linkage in China. The paper analyses the dynamic relationships between trade balance , FDI and real exchange rate in China based on a vector autoregressive (VAR) model. The empirical result approves the reciprocal cause–and -effect relationships among the three variables in consideration in the long term. FDI improves the trade balance in the long run. FDI improves the trade balance in the long run. The improvement of a real depreciation of RMB on the trade balance lags for about two years, which is J-curve effect. The export volume have no significant effect on FDI. On the other hand the stability of the real exchange rate is an incentive to FDI. The recent pressure of RMB's appreciation largely rests with trade surplus and massive FDI inflows. The appreciation of RMB will not deteriorate the trade account but it will have a negative effect on FDI inflows in a certain period of time.
Keywords/Search Tags:China International Trade, Foreign Direct Investment, Real effective exchange rate, Vector Autoregressive model (VAR model)
PDF Full Text Request
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