Empirical Analysis: Business Cycles and Inward FDI in China

Abstract: It is well-known that the current speeding-up of globalization has been, on one hand, spreading macro economic effects around the world, while, on the other, fueling firms ’ activities of crossing national borders. Then, are there any links between these two influences? In this paper, we chose China as our subject, to try to clarify it. A set of models for Granger Causality test and VAR Impulse Responses were constructed and some econometric estimations and empirical analysis were made by employing the latest 20-year authorized annual statistic data. And the findings clearly indicated that firms ’ (foreign) activities (inward FDI) do respond pro-cyclically to business cycle developments in a long term