The Real Exchange And Economic Growth: Research In The View Of China

In recent years, the academic research began to focus on the deep-rooted role of the real exchange rate in the economic growth. They thought that the change of the level of the real exchange rate can affect economic growth by adjusting the internal structure and the actual resource, also the empirical analysis proved this view. In many discussion of China’s real exchange rate, the explore to the internal mechanism of the real exchange rate influence to the economic growth in is not common. This article is based on the results of previous studies and the characteristics of China’s economy, studies for the real exchange rate impact to China’s economic growth through the theoretical and empirical analysis. This article makes conclusions that the rise of the level of the real exchange rate can promote economic growth of China.First, we construct a theoretical model of the two sectors, analysis the relationship of the real exchange rate capital investment, labor input and output of two sector by model. Through the model we think the devaluation of the real exchange rate can promote economic growth, and we explain the impact mechanism of the depreciation. The external real exchange rate influences the economic by two bodies--the internal real exchange rate and the exchange rate between tradable goods. Depreciation of the external real exchange rate have positive impact on the output for the two sectors from the supply side and the demand side,through internal and external influences. It improve labor input and capital inputs to tradable goods sector, improve the level of demand for the two sectors.Then, based on 31 provinces of China 1993 to 2012 panel data, the article analysis the empirical relationship between the internal real exchange rate and the growth rate of real GDP per capita. We find depreciation of the internal real exchange rate can significantly improve the growth rate of real per capita GDP, which effects are robust. Meanwhile, empirical analysis after grouped find that depreciation of the internal real exchange rate promote economic growth mainly in the coastal areas, in inland areas the influence of the internal real exchange rate is not significant, the article has given this explanation.Finally, the paper discusses policy issues related to the real exchange rate. Many scholars support policy instrumental of the real exchange rate to some extent from theoretical and empirical analysis. If the real exchange rate is as a policy tool for supporting the implementation of other policies, meanwhile the real exchange rate policy exists the cost, at the right time and under right conditions the government should take appropriate steps to adjust and exit the policy of devaluation and undervaluation. These conclusions has some inspiration to China’s policy.