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A study on the effect of RMB exchange rate fluctuation on technological innovation and total factor productivity

Author

Listed:
  • Weiping Jia
  • Ling Wu
  • Xinya Zeng

Abstract

Based on the influence of RMB exchange rate fluctuation on the development of manufacturing firms, this research constructs a model from the perspective of reverse push to investigate the influence mechanism of exchange rate fluctuation on the total factors productivity (TFP) of manufacturing firms. The results show that: 1) the rise of the RMB exchange rate is conducive to the enhancement of the TFP of China's manufacturing firms, and the higher the ratio of intermediate goods import and export, the greater the effect of RMB appreciation on TFP of manufacturing firms; 2) the rise of the RMB exchange rate increases the number of patents applied by manufacturing firms and thus helps to make better the TFP; 3) compared with non-state-owned, high-tech and capital-intensive manufacturing firms, the rise of RMB exchange rate has a more noticeable influence on TFP improvement of state-owned, low-technology and labour-intensive firms; 4) reform of exchange rate formation mechanism in July 2005 enhanced the effect of RMB appreciation on TFP of manufacturing firms with more imports or fierce competition. From the perspective of the exchange rate, this research provides policy recommendations for Chinese manufacturing firms to increase TFP.

Suggested Citation

  • Weiping Jia & Ling Wu & Xinya Zeng, 2024. "A study on the effect of RMB exchange rate fluctuation on technological innovation and total factor productivity," International Journal of Manufacturing Technology and Management, Inderscience Enterprises Ltd, vol. 38(6), pages 494-517.
    • Handle: RePEc:ids:ijmtma:v:38:y:2024:i:6:p:494-517
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