The Relationship between the Real Exchange Rate and Balance of Payments: Empirical Evidence for China from Cointegration and Causality Testing

Posted: 10 Jun 2012

See all articles by Paresh Kumar Narayan

Paresh Kumar Narayan

Deakin University - School of Accounting, Economics and Finance

Russell Smyth

Monash University - Department of Economics

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

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

Paresh Kumar Narayan (Contact Author)

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

Russell Smyth

Monash University - Department of Economics ( email )

Wellington Road
Clayton, Victoria 3
Australia

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