Carbon Emission Reduction Effect of RMB Exchange Rate Fluctuation : Empirical Evidence from 283 Prefecture−Level Cities in Chinacarbon Emission Reduction Effect of RMB Exchange Rate Fluctuation:Empirical Evidence from 283 Prefecture−Level Cities in China

Although extensive literature focusing on the determinants of carbon emissions, little attention has been paid to the impact of exchange rates on carbon emissions in emerging economies. Based on 283 Chinese prefecture−level cities from 2006 to 2019, this paper measures the effects and mechanisms of the RMB exchange rate fluctuation on regional carbon emissions intensity. The results show that: (1) The appreciation of the RMB real effective exchange rate has a significant carbon emission reduction effect. For every 1% appreciation of the exchange rate, the average carbon emission intensity of the region decreases by 0.338 tons/10,000 yuan. (2) The carbon emission reduction effect is more apparent in the eastern and coastal regions, densely populated areas and areas with high information disclosure. (3) The appreciation of the RMB effectively reduces carbon emission intensity by enhancing the region's R&D and innovation capabilities, suppressing its foreign trade and foreign investment levels, promoting industrial structure optimization and upgrading, and exacerbating income inequality