'KODISA International Conference on Business and Economics (KODISA.ICBE)'
Abstract
This research explores the short-run and long-run dynamic
relationships between exchange rate fluctuations and foreign direct
investment (FDI) inflows in China. Monthly time series data from
the National Bureau of Statistics of the People’s Republic of China
are analyzed by employing co-integration tests, vector error
correction models, Wald tests and impulse responses. The empirical
results indicate that a change in exchange rates negatively affects
FDI inflows in the long run while there exists no evidence of shortrun
dynamics and reciprocal feedback between exchange rate
fluctuations and FDI inflows. Furthermore, a structural break occurs
during the 2007-2009 Asian financial crisis shock to FDI inflows in
China