A Theoretical and Empirical Investigation on China's Economic Growth Determinants (1978-2003)

Abstract

The main goal of this paper is to empirically analyze China's growth experience during the period of 1978 to 2003. We have started with the hypothesis that China's economic growth during the last decades can be characterized by different aspects such as the investment rates (physical capital accumulation), a higher degree of financial and trade openness, a pegged exchange rate regime and human capital investments. The results from the estimation of vector autoregressive (VAR) models using variance decomposition and Granger causality tests suggest that investment and exchange rate are the main determinants of China's economic growth for the period considered.