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On the Relation between Exchange Rates and Domestic Investment: Asymmetric Evidence from China's 31 Provinces

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  • Guimin Lu
  • Jungo Baek
  • Soojoong Nam

Abstract

The current paper investigates whether the exchange rate asymmetrically influences domestic investment in China. To this end, the nonlinear autoregressive distributed lag (NARDL) process is applied to investment data disaggregated by China's 31 provinces. We discover that there is evidence that the ups and downs of the yuan have asymmetric impacts on domestic investment for some provinces, though not all, in both the long‐ and short‐run.

Suggested Citation

  • Guimin Lu & Jungo Baek & Soojoong Nam, 2022. "On the Relation between Exchange Rates and Domestic Investment: Asymmetric Evidence from China's 31 Provinces," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(4), pages 477-488, December.
    • Handle: RePEc:bla:ausecr:v:55:y:2022:i:4:p:477-488
    DOI: 10.1111/1467-8462.12479
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