An ocean apart? The effects of US business cycles on Chinese business cycles

This study investigates the economic interdependence between China and the United States. In view of the growing trade and investment between China and the United States, and the reaction of the Chinese economy to the US subprime mortgage crisis, one might reasonably ask, what effect do US business cycles have upon the Chinese economy? We approach this problem by examining various channels of economic interaction, including international trade and foreign direct investment between the two countries. We use regressions, the Markov switching vector autoregressive model, and recursive correlations in an attempt to measure business cycle transmission from the United States to China using annual, quarterly, and monthly data.