The Research Of The RMB Appreciation Impact On The Korean Economy

In this paper, vector autoregressive model with exogenous argument is introduced, the period of1994-2012, after China and South Korea established diplomatic relations, empirical analysis of the RMB appreciation impact on the Korean economy. Inspect RMB appreciation impact on Korea’s main macroeconomic data total output, inflation, interest rates, capital account and other economic variables. In-depth analysis of the overall sample data, the RMB exchange rate and the economic data after the reform, address the possibility error to make sure the authenticity and reliability of the results. Thus reflects the impact of the RMB appreciation on the international economic and society. According to the impulse response and variance decomposition test results show that the RMB appreciation impact on the South Korean capital flows is significantly negative effect, and the statistical results are significant; cause significantly short-term negative impact on the South Korean Won exchange rate, it also explains that the RMB appreciation led to the appreciation of the South Korean Won against the U. S. dollar; also have smaller fluctuations on the South Korea’s GDP and short-term interest; and has almost no effect on the South Korean inflation. According to the test results concluded that the appreciation of the RMB has a significant effect on the Korean economy and the RMB appreciation has lasting and significant negative impact on the South Korean capital flows, and has not significant impact on the Korean goods, the total amount of services and the inflation. According to the conclusions of this paper, it is recommended that South Korea as Asia’s developed countries should establish an effective mechanism of international economic cooperation, and when stabilize the national capital flows, the development of the exchange rate regime, should pay more attention on the RMB to avoid the risks and hazards of the influence on the capital flow. The result of this paper is not only a test of the RMB appreciation on the economic impact of the other countries, but also provides analysis perspective to broader understanding the impact of the RMB appreciation, contribute to a correct understanding of the international impact of the RMB appreciation, and correctly deal with the issue of the RMB appreciation by the international community, correctly understand the impact of China’s economy on the international economy.