The Research On Influence Foreign Trade Exerts On China's Business Cycle

The business cycle is a complicated phenomenon in economical operation, and the research on business cycle is an attracting issue. However, with the rapid development of economic globalization, more and more foreign trade and transnatioal financial activities are undertaken, and it is recognized that the theoretical analysis of business cycle should not be done only within the framework of closed economy. Under the opening economic circumstances, one country can transmit its own economic fluctuation to other countries of the rest world through trade and financial channels, in reverse, the economy of the same country would be affected seriously by other countries in the same way. Consequently, it is worthwhile and of great sense to study the business cycle transmission mechanism of foreign trade.Based on the study of foreign trade and business cycle, this thesis analyses the influence foreign trade exerts on China's business cycle from theoretical and empirical study., using many econometric analysis, such as Co-integration Tests, ADF Unit Root Test and Pulse-response Function. Furthermore, this thesis uses empirical analysis in trade openness and the foreign trade shock to China's business cycle. From such analysis, firstly, the thesis expounds that there is a close relationship between foreign trade and business cycle; Secondly, foreign trade has both short-term and long-term promote function to GDP, trade fluctuation especially the export fluctuation exerts an significant influence on business cycle. Thirdly, the active effect outweighs the negative effect which the foreign trade brings, and the reason is that the negative effect is assimilated by China economy's growth. So the right choice of China is to perfect the market economy system, establish the balance system of both the homeland and the abroad, to avoid the extensive economic fluctuation, and in order to maintain the trend of stable economic growth.