An empirical investigation of the relationship between real exchange rate and innovation: Evidence from China

Abstract

The aims of this study is to investigate the relationship between real exchange rate and innovation in China for the period spanning from 1985 to 2020 using an annual time series data collected from different sources. The study employs autoregressive distributed lag bound test and other econometrics techniques to analyse the short‐run and long‐run relationship among the variables. The findings of the study reveal the existence of short‐run and long‐run relationship between real exchange rate (undervalued RMB) and technological innovation. Furthermore, real exchange rate (undervalued RMB) has positive effect on innovation while real exchange rate volatility is negatively affect innovation. Based on the above empirical findings, the study suggests some policy implications which are considered important for fostering rapid and sustainable economic growth.

Research elevation of bank lending and technological innovation in the excess liquidity countries

“…It means higher GDP produces more prosperous innovation independently. Wen & Usman [ 7 ] stated that exchange rate depreciation improves national innovation through trade openness. Ebersberger [ 8 ] and Tang et al [ 9 ] suggest a government subsidy to enhance innovation by alleviating financial constraints, improving labor's creativity, and spurring technological innovation.…”