Does the economic integration of China affect growth and inflation in industrial countries?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Chinese economic development affects GDP growth and inflation in the advanced countries. A GVAR approach is used to model the interdependencies between the business cycles in China and industrial countries, including the US, the euro area and Japan. For robustness, the results are compared to those obtained by leading structural econometric models, such as NiGEM and OEF. Evidence is based on the responses to a Chinese shock stemming from the recent fiscal stimulus package. The results indicate that the impact on GDP growth in the advanced economies is substantial for the Asian region. The expansionary effects to the US and the euro area responses are much lower and decrease due to rising inflation pressure. The analysis also reveals that China is still highly vulnerable to shocks in industrial countries, including the government debt crisis in the euro area. Terms of use: Documents in JEL:E32, F15, C51 Keywords: GVAR, Chinese integration, shock transmission, euro area debt crisis

System estimation of GVAR with two dominants and network theory: Evidence for BRICs

“…In the GVAR framework, it is widely accepted that the US could be considered as being a dominant economy in the model Chudik, and Pesaran (2013). Nevertheless, the use of US economy as the only dominant unit in the GVAR model is an ad-hoc approach that is, thus far, justified solely based on economic 2 For a thorough discussion on the BRIC economies and their complex dynamic interdependencies see inter alia Cakir and Kabundi (2013), Allegret and Sallenave (2014), and Dreger and Zhang (2014). To this end, in this paper we construct an upgraded compact (macro)econometricmodel that incorporates both the complex interdependencies that exist between the various economic entities and the fact that in the global economy more than one of these entities could have a predominant role.…”

On the Exposure of the BRIC Countries to Global Economic Shocks

“…The BRICs' slowdown might be traced back to the long-lasting effects of the crisis that have been temporarily whitewashed by expansionary policy measures. In particular, the Chinese authorities launched a huge fiscal program to compensate for the reduction in exports over the crisis period (Dreger and Zhang, 2014). The strategy prevented a sudden drop of output growth not only in China, but also in countries with strong exposure to natural resources.…”

Propagation of changes in demand through international trade: A case study of China

“…Most of these models include variables such as real GDP growth, inflation, real exchange rates, and short-and long-term interest rates. Additionally, some authors such as Cesa-Bianchi et al (2011), Dreger andZhang (2013) and Dizioli et al (2016) include equity prices. Dizioli et al (2016) and Cashin et al (2016) include financial variables, such as a financial stress index, along with the oil price.…”

“…Dreger and Zhang (2013), among others, use these models to check robustness. On average, the estimated effects of a demand shock in China on the rest of the world seem to be much smaller in DSGE or CGE models than with econometric models.…”

“…Ahuja and Myrvoda (2012), or global vector autoregressive (GVAR) models, e.g. Dizioli et al (2016), Dreger and Zhang (2013), Hong et al (2016), Cesa-Bianchi et al (2011), Cashin et al (2016), or Inoue et al (2015 (see Table 1). Most of these models include variables such as real GDP growth, inflation, real exchange rates, and short-and long-term interest rates.…”