Fiscal Expenditure,Real Exchange Rate And NET Export Of China

First,this dissertation has identified the time-varying covariant relationship among China's fiscal expenditure,RMB's real exchange rate and the total net exports dynamically by employing SV-TVP-SVAR model.Secondly,we selected several typical cases of the RMB exchange rate regime reforms which happened on 1998Q1,2005Q3,2008Q3 and 2010Q3 to investigate whether the time-varying covariant relationship is different in distinct exchange rate regimes.Then,we checked the robustness of China's fiscal expenditure effects by adjusting the order of endogenous variables in the reference model.Finally,we decomposed the total net exports into net exports of goods and services,then checked the time-varying covariant relationship among them and China's fiscal expenditures.Through the analysis above,the conclusions of this dissertation are as follows.First,the effect of China's fiscal expenditure on RMB's real exchange rate and the total net export has a significant time-varying character.On the whole,China will experience the “twin divergence” process and “twin deficits” process alternatively.Second,there is a significant lag effect of fiscal expenditure on the real exchange rate and the total net export.In the short term,the impact of fiscal expenditure is the most significant,but the impact of expenditure declines to zero in the long term.Third,the reform of the RMB exchange rate regime will significantly change the characters of China's fiscal expenditure effects.By implementing the floating exchange rate regime,China performed an immediate “twin deficits” linkage.To the contrast,China's “twin deficits” linkage has a strong time-lag and uncertainty when implementing the fixed exchange rate regime.Fourth,the response pattern of goods and total net exports in the face of fiscal expenditure expansion shock is similar.Goods net exports also experienced the “twin divergence” and “twin deficits” alternatively and the real exchange rate mechanism plays a significant role in the linkage effect.Finally,the fiscal expenditure expansion has intensified volatility of services net export and caused the deterioration of service net exports in most of the period.In addition,the real exchange rate mechanism is not obvious in the linkage between fiscal expenditure and service net export.