Empirical Analysis II: Business Cycles and Inward FDI in China

Abstract

It is well-known that the current speeding-up of globalization has been, on one hand, spreading macro economic effects around the world, while, on the other, fueling firms’ activities of crossing national borders. Then, are there any links between these two influences? As we have concluded in previous research that inward FDI and business cycle development do pro-cyclically relate on Granger base, this paper will further discuss "how do they react to each other?" Again, we chose China as subject and employed the 1983~2004 authorized annual statistic data. By constructing an Endogenous Growth model, we, after processing Correlation Analysis and testing the coefficient significance of each variable, found out the original momentum of Chinese economic growth and explored whether there exist some long-term relationship through Johansen Co-integration Test