Empirical Analysis: Business Cycles and Inward FDI in China

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.