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Synchronization of regional growth dynamics in China

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  • Bian, Zhicun
  • Ma, Jun
  • Ni, Jinlan
  • Stewart, Shamar

Abstract

In this paper, we document significant evidence of time-varying synchronization of the regional growth dynamics within China. Using a dynamic factor model extended with time-varying loading parameters and stochastic volatility, we observe a substantial amount of time variations in the loading parameters of the common factor– implying that the exposure of regional growth to the common national factor varies substantially. We find that the correlation in cross-region economic growth performance increased during the recent global recession and declined post-recession, albeit still at a higher level than before 2008. While the large degree of synchronization of regional growth dynamics permits the central government or central bank to implement a uniform fiscal or monetary policy, this concurrently reduces China's ability to stymie the propagation of external shocks and instead increases systemic risks across regions.

Suggested Citation

  • Bian, Zhicun & Ma, Jun & Ni, Jinlan & Stewart, Shamar, 2020. "Synchronization of regional growth dynamics in China," China Economic Review, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:chieco:v:61:y:2020:i:c:s1043951x18301305
    DOI: 10.1016/j.chieco.2018.09.007
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    Cited by:

    1. Anping Chen & Nicolaas Groenewold, 2019. "Regional resilience in China: The response of the provinces to the growth slowdown," Economics Discussion / Working Papers 19-06, The University of Western Australia, Department of Economics.
    2. Beverly, Joshua P. & Neill, Clinton L. & Stewart, Shamar, 2022. "The Dynamics of Labor Force Participation: All Quiet on the Appalachian Front?," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322258, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    Dynamic factor Model; Synchronization; MCMC Gibbs-sampling algorithm;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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