Impact Of Exchange Rate Changes On Fdi Inflows Of Countries Along The Belt And Road

Since the Belt and Road initiative was formally proposed in September 2013,It has gradually become an important strategy for China in economic transforming and upgrading,expanding the opening-up,and establishing a new type of international cooperative relation.With the development of economic globalization and the continuous advancement of the Belt and Road initiative,foreign direct investment in countries along the Belt and Road has shown a rising trend.Among them,the growth rate of China 's direct investment in countries along the Belt and Road is particularly rapid.At the same time,in recent years,the exchange rate systems of the countries along the Belt and Road have become more flexible and the marketization of exchange rates has gradually increased.Therefore,the exchange rates of the countries along the route have been deepened by the impact of national and world economy.Due to factors such as the volatile international economic situation,the slow global economic recovery process,and the geopolitical complexity along the Belt and Road,the exchange rate volatility of the countries along the route have always been at a relatively high level,so their exchange rate changes have also become the focus of attention of international investors.Considering the increasing importance of exchange rate changes on the FDI of countries along the route,studying the impact of exchange rate changes on the FDI of countries along the Belt and Road has greatmeaning in promoting the inflow of international capital along the countries along the route,expanding China 's opening up,and advancing the Belt and Road initiative.Based on the background,the article uses theoretical and empirical analysis to study the impact of exchange rate(exchange rate levels and exchange rate volatility)of countries along the Belt and Road on host countries' FDI.In the theoretical analysis,this paper comprehensively discusses the theoretical impact mechanism of exchange rate on foreign direct investment from the aspects of exchange rate level and exchange rate volatility,including the cost effect,the wealth effect,the demand effect,the risk effect and the production flexibility effect,and puts forward the hypotheses required for this study based on the above theory and the facts of the countries among the Belt and Road.In terms of empirical analysis,this paper uses the relevant panel data of China and the countries along the Belt and Road from 2004 to2018,and uses systemic GMM to study the exchange rate of the countries along the Belt and Road to host countries' FDI,and further explore the effects of the Belt and Road Initiative.The paper then groups the countries along the Belt and Road to study the impact of exchange rate on FDI in countries with different natural resource conditions along the Belt and Road.Through empirical research,this article has proved the previous hypothesis well.Specifically,we can find: firstly,among the countries along the Belt and Road,the depreciation of currencies and the reduction of exchange rate volatility will promote the inflow of FDI;secondly,the continuous advancement of the Belt and Road initiative will amplify the impact of the exchange rate on FDI;thirdly,compared with the non-natural-resource-rich countries,the exchange rate of the natural-resource-rich countries has a smaller impact on the host countries' FDI.Finally,based on the above conclusions,this paper put forward policy suggestions for China on how to further expand opening-up and advance the Belt and Road initiative.