The Relationship between the Real Exchange Rate and Balance of Payments: Empirical Evidence for China from Cointegration and Causality Testing
Posted: 10 Jun 2012
Date Written: 2004
Abstract
This article examines the relationship between the renminbi real exchange rate and China's foreign exchange reserves using cointegration and Granger causality testing. The main findings are that in the long run foreign exchange reserves Granger cause the real exchange rate. Meanwhile, in the short run there is unidirectional Granger causality running from foreign exchange reserves to the real exchange rate.
Suggested Citation: Suggested Citation
Narayan, Paresh Kumar and Smyth, Russell, The Relationship between the Real Exchange Rate and Balance of Payments: Empirical Evidence for China from Cointegration and Causality Testing (2004). Applied Economics Letters, Vol. 11(5), pp. 287-291, 2004, Available at SSRN: https://ssrn.com/abstract=2080844
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