Original scientific paper
The relationship between exchange rate and macroeconomic variables in China
Chi-Wei Su
; Department of Finance, Wuhan University, Luo-jia-shan, Wuchang, China
Abstract
Renminbi (RMB) exchange rate and macroeconomic variables in China, as well as guidelines for reform of RMB exchange rate regime. The long-run equilibrium relationship between RMB exchange rate and macroeconomic variables of China is examined by applying the non-parametric rank tests proposed by Breitung. Furthermore, this study uses the threshold error-correction model (TECM) to detect the nonlinear casual relationship between RMB exchange rate and
macroeconomic variables that are nonlinear forms. The results show that RMB exchange rate and macroeconomic variables have nonlinear relationship with each other. In the long run, these results demonstrate solid evidence that RMB exchange rate and macroeconomic variables support the hypothesis of an asymmetrical error-correction process in China. Our results have important policy
implications for Chinese government under study.
Keywords
RMB exchange rate; nonlinear rank test; threshold error correction model
Hrčak ID:
83350
URI
Publication date:
19.6.2012.
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