With exports almost half of its GDP and most of these directed to Europe and North America, negative financial shocks in those regions might be expected to retard China’s growth. Yet mitigating factors include the temporary flight of North American and European savings into Chinese investment and some associated real exchange rate realignments. These issues are explored using a dynamic model of the global economy. A rise in American and European financial intermediation costs is shown to retard neither China’s GDP nor its import growth in the short run. Should the Chinese government act to prevent the effects of the investment surge, through tighter inward capital controls or increased reserve accumulation, the associated losses would be compensated by a trade advantage since its real exchange rate would appreciate less against North America than those of other trading partners. The results therefore suggest that, so long as the financial shocks are restricted to North America and Western Europe, China’s growth and the imports on which its trading partners rely are unlikely to be significantly hindered.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Australian National University, Centre for Applied Macroeconomic Analysis in its series CAMA Working Papers with number
2008-08.
Find related papers by JEL classification: C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements F17 - International Economics - - Trade - - - Trade Forecasting and Simulation F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation O5 - Economic Development, Technological Change, and Growth - - Economywide Country Studies
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: