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A Dynamic Model for Evaluating the Impact of FDI on Macro Economy based on Panel Data Method

Li Zhou, Qing-yi Chen

Abstract


Capital account opening will cause complex economic consequences, domestic researches generally thought Open FDI Strategy usually has significantly positive effects. Capital account will bring domestic economic growth instability whether completely open, or part to open. This paper draw lessons from other country’s experience and analyze how Open FDI Strategy can influence real exchange rate and the fluctuation of economic growth. According to the result of dynamic model, FDI does not cause the fluctuations of real exchange rate, but can cause the instability of domestic economic growth, the empirical results of this paper fully comply with this prediction.

Keywords


Open FDI strategy, dynamic model, exchange rate, economic stability, panel data.

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