External Imbalance Of The Impact On Macro-economy

This paper studied the current external imbalance of the impact on macro-economy. The paper mainly analyzed the external imbalances on the domestic impact of macroeconomic target variables and revealed the pros and cons of external imbalance for China's economic development and supplies empirical and theoretical basis for economy's sound and rapid development in an open economy.This paper analyzed the specific issues step by step by the basic economic theory, and had empirical analysis by econometric models, that is, normative analysis and empirical analysis to combine to make analysis more credible.Balance of payments, economic growth, full employment and price stability are a country's main macro-economy objectives of macro-control. The external imbalance analyzed in this paper is related to the balance of payments problem, and the domestic economy involved economic growth, full employment and price stability. Because price stability is not very good grasp of direct research, and China's current inflation is a greater extent with the relevant excess supply of money, so the paper choose the domestic base money supply as an alternative to study. Specifically, the paper studied the impact of the external imbalance on China's economic growth, the employment and domestic money supply separately.The main part, firstly gave the definition of the external imbalances, and analyzed the status of external imbalances and the reasons of causing the imbalance. After defining the concept of external imbalances, economic growth, employment levels and money supply as a study of domestic were proposed as the macro-economy variables, and briefly introduced the basic content and measure indicators of the economic growth, employment levels and the domestic money supply a. Model, variable selection and data processing is an important empirical component parts. Empirical conclusions were draw by the purpose of the study and empirical test. Finally, the paper would give some specific policy recommendations.In the part of studying the impact of the external imbalance on economic growth, the paper sets model according to the endogenous growth theory, and focuses on the impact of foreign direct investment on economic growth in China. The study found:(1) there is a long-run equilibrium relationship between Foreign Direct Investment and GDP. (2) For the impact on GDP, the efficiency of the foreign direct investment is as 2-3 times as the efficiency of domestic investment; (3) in the current stage, there is a certain degree of mutual causality between foreign direct investment and China's economic growth. In the part of studying the impact of external imbalances on the employment level, based on the theoretical analysis. the paper presented a model which includes the variables of net exports and foreign investment.The next the paper examined the impact of trade surplus and net exports on the second level of industrial employment by using the model. this part get the following conclusions by the method of cointegration and variance decomposition: (1) the total effect of trade surplus and foreign direct investment on China's employment of the second industry is positive; (2) compared with the foreign investment, the domestic investment can not effectively promote the employment; (3) the impact of the foreign investment on employment is greater the net exports.In the part of studying the impact of the external imbalances on the domestic money supply, this part choose the foreign exchange reserves as the results of the external imbalance,and studied the influence of endogeneity of the basis money supply. According to the theory of the monetary approach to balance of payments and specific issues, this part identified some variables which need to be studied and controlled. Based on the multivariate VAR model and using the measurement method, this part got the conclusions such like that the foreign exchange reserves to money supply had the endogeneity and the central bank bonds played the reversal role in the current stage.