The Impact Of Real Exchange Rate Undervaluation On R&D Activity

The real exchange rate is a comparative form of the actual prices of commodities in the two countries.It is a core position in international finance,and its changes have a certain impact on a country's balance of payments,prices,income,and employment.Therefore,the real exchange rate can be regarded as one of the important macroeconomic variables.It has very important significance for economic growth.The real exchange rate misalignment is relative to internal equilibrium and external equilibrium.Since Rodrik put forward the viewpoint that the exchange rate underestimates the economic growth in 2008,there have been a lot of discussions and empirical tests on the theoretical mechanisms of real exchange rates and economic growth.Most of the studies have shown that the deviation of the real exchange rate(ie the underestimation and overestimation of the exchange rate)can not be ignored for the economic growth.The healthy and sustainable development of a country's economy depends on the continuous innovation of enterprises and the improvement of labor productivity driven by technological progress.R&D is the source of power for the company's survival and development,and it is related to the core competitiveness and the future growth potential of the company.The impact of exchange rate changes on the R&D activities of the company cannot be ignored.Therefore,It is of great practical significance to study the impact of exchange rate imbalances on R&D activities.We adopt a combination of theoretical research and empirical research to study and explore the relationship between the actual tax rate imbalance,R&D activities and economic growth in the paper.First,we reviewed the relevant literature and summarized the research status at home and abroad.Secondly,we introduced the relevant basic concepts theoretically,and theoretically analyzed the relationship between exchange rate imbalances and R&D activities,the relationship between R&D activities and economic growth,and the relationship between exchange rate imbalances and economic growth.In the empirical part,first of all,we select the time span from 1996 to 2014 and conduct random sampling of many countries and regions in the world with considering the availability and continuity of data,and finally we screen date from 65 countries.Then following Rodrik's(2008)approach,we constructed an undervalued index and use a fixed-effects panel model from a cross-national perspective to study how real exchange rate imbalances affect R&D activities.From the perspective of the actual exchange rate underestimation,this issue has been studied in depth.Finally,we summarized the empirical results and put forward policy recommendations.The results show that:(1)The exchange rate of most developing countries is undervalued,the exchange rate of most developed countries is overestimated,and the real exchange rate fluctuations in the developing countries are about two times that of the developed countries.(2)The R&D level of developed countries is generally higher than that of the developing countries.(3)Undervalued exchange rate has a negative impact on R&D activities,and the undervalued exchange rate in developed countries is more obvious for R&D activities.