RMB Exchange Rate and China¡¯s Economic Growth: The Empirical Analysis from a Structural VAR Model

Cancan Su and Jia Wu

International Journal of Economics and Finance, 2017, vol. 9, issue 7, 189-199

Abstract: This paper analyzes the relationship between the exchange rate and the real GDP of China in the long period from 1952 to 2014 using a structural VAR model. We examine the mutual effect of the two variables in three periods: The results show that there is no obvious relationship between the exchange rate and real GDP before China¡¯s reform and opening-up period. However, a significant positive correlation is found in the sample of 1979-1993, which means that the depreciation of the RMB is associated with the output increases. The direction between the exchange rate and real GDP becomes negative after 1994, indicating that RMB appreciates with the output increases in this period. In addition, based on Granger causality test, we found the exchange rate could Granger causes GDP after 1978, but there is no Granger causality connection between the two variables before 1978.

Keywords: RMB exchange rate; economic growth; bivariable analysis; structural VAR model (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:9:y:2017:i:7:p:189-199

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