| Since the collapse of Bretton woods in 1973, the liberalization of financial market has made the international financial situation more and more turbulent. The exchange rate fluctuations between main countries, especially G-3 exchange rate volatility became an important reason of the world economic instability. With the gradual opening-up of the world economic system, G-3 exchange rate volatility may affect export-oriented economies of developing countries. Some of the variables mentioned as being influenced by this volatility are: Trade flows, foreign direct investment, currency crisis, debt servicing, and portfolio composition as well as commodity prices. With regard to developing countries, trade flows play a crucial part in their economic growths. Therefore, whether preventing G-3 exchange rate volatility has an advantage to the development of world economy or the developing countries is becoming one interesting topic.Based on such knowledge, some scholars abroad have done some real diagnosis research on the influence of G-3 exchange rate volatility on the trade flows of developing countries. However, existing research is mainly on the target zones. The exchange rate displays influence not only on the exportation quantity, but also on the international competitiveness of domestic-funded foreign trade enterprises compared with foreign-invested corporations. Moreover, USA, Japan and Euro sector are main trade partners of China. Theoretically speaking, G-3 exchange rate volatility possibly affects Chinese exports from both kinds of enterprises, but the influence degree is not in the same way. Therefore, it has a practical significance to research how G-3 exchange rate volatility affects Chinese exports of both kinds of enterprises above mentioned.This paper reviews the experience and comments of G-3 exchange rate volatility since 1973, especially summarizes the research achievements of the relationship between exchange rate volatility and one country's trade flows in Introduction. As follows, Chapterâ… introduces briefly the theoretical analyses of the infection of exchange rate fluctuation on international trade. Chapterâ…¡studies different impacts on exports from both domestic-funded and foreign-invested enterprises in China through use of a Gravity Model and time series analysis. The regression result shows that G-3 exchange rate volatility is found to have a negative effect on Chinese exports. Moreover, the euro/dollar uncertainty has a significantly negative effect on foreign-invested enterprises' exports while the yen/dollar fluctuation has a greatly negative influence on exports of domestic-funded ones, which results from differences of export behaviors between both types of companies. Facing G-3 exchange rate volatility, Chapterâ…¢tries to provide some strategic suggestions from angles of building up target zones, the development pattern of Chinese foreign trade enterprises as well as national industrial policy adjustment. The last part gives an all-round conclusion. |
