Impact of foreign political instability on Chinese exports
International trade promotes economic development and leads to peace and stability in a country. Political instability affects trade through its direct effect on income and prices and indirectly through its influence on investment in physical capital. This study aims to examine the impact of foreign political instability on Chinese exports. A panel data set of 121 importing countries, covering time period from 1988 to 2011 is used to investigate the potential impact of foreign political instability on Chinese exports. The data was analyzed using the alternative dynamic panel and dynamic system generalized method of moments (SGMM). Three measures of political instability including political safety, revolutionary wars and adverse regime change have been used to analyze the impact of foreign political instability on Chinese exports. Results suggest that foreign political instability (adverse regime change) has negative and statistically significant impact on Chinese export. The results further show that income and real exchange rate have a positive and significant impact on Chinese exports.
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