The Analysis of Simultaneous Multi-Equations Model on the Relationship between Trade and Economic Growth in China

Abstract

Since reform and opening up, foreign trade has played an important role in promoting the development of China's market economy. The thesis based on the theory of econometrics makes analysis of simultaneous multi-equations model on the relationship between foreign trade and economic growth in China by the data of 1978-2007, and concludes that export indeed played an important role in promoting economic growth, and the positive effect of export exceeds the negative effect of import; the negative effect of import on the economy can be offset through affecting consumption which impacts on economic growth positively; china's economy will have more space for development because of the discover in the thesis that domestic demand has almost the same effect in promoting economy as export.