| ID | 148693 |
| Title Proper | Real effective exchange rate and regional economic growth in China |
| Other Title Information | evidence from provincial data |
| Language | ENG |
| Author | Yan, Guo ; Li, Sheng ; Lin, Yaqi ; Li, Jie |
| Summary / Abstract (Note) | Using data for the period 2000–2011, we construct province-level real effective exchange rate (REER) indices for China and test the effect of REER depreciation on regional economic growth in a generalized method of moments regression framework. Our results show that REER depreciation, in general, promotes regional economic growth, through increasing net exports and lowering FDI costs. After dividing the full sample into coastal and inland subsamples, we find that REER depreciation influences economic growth in inland areas but not in coastal areas. This is due to the fact that the inland areas have more surplus labor or other resources to expand their production capacity when REER depreciation leads to increased world demand. Furthermore, compared to inland areas, processing-and-assembly trade comprises a larger share of trade in the coastal areas, where traders import more raw materials and intermediate goods to process and assemble goods. When the exchange rate depreciates, the costs of imported materials and immediate goods increase. In this case, the benefits from REER depreciation in coastal areas are offset to some extent and are thus lower than in inland areas. |
| `In' analytical Note | China and World Economy Vol. 24, No.6; Nov-Dec 2016: p. 43–63 |
| Journal Source | China and World Economy 2016-12 24, 6 |
| Key Words | China ; Regional Economic Growth ; Real Effective Exchange Rate |