Permanent and Transitory Macroeconomic Relationships between China and the Developed World
AbstractThe relationships between the economic fluctuations of the US and China, the largest developed and developing countries respectively, are very important not only to both countries but also to the world economy. This paper applies a two-country correlated unobserved components model to explore the relationships between the real output fluctuations for the US and China over the period 1978q1-2008q4. The model allows us to distinguish cross-country correlations driven by permanent movements, caused by real shocks such as changes in technology and institutions, from those due to transitory movements. We find that the two countries share approximately half of their permanent and transitory shocks. With information from the real output of China, the magnitude of estimated transitory components fluctuations of the US real GDP is larger, while the transitory component of China’s real GDP does not change much with the addition of US information and other alternative external information sets such as real GDP of Hong Kong as well.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by The George Washington University, Institute for International Economic Policy in its series Working Papers with number 2010-08.
Length: 42 pages
Date of creation: Oct 2010
Date of revision:
Unobserved Components; Business Cycles; Economic Growth;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
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.:
- Chow, Gregory C & Lin, An-loh, 1971.
"Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series,"
The Review of Economics and Statistics,
MIT Press, vol. 53(4), pages 372-75, November.
- Tom Doan, . "DISAGGREGATE: RATS procedure to implement general disaggregation (interpolation/distribution) procedure," Statistical Software Components RTS00050, Boston College Department of Economics.
- Tom Doan, . "CHOWLIN: RATS procedure to distribute a series to a higher frequency using related series," Statistical Software Components RTS00036, Boston College Department of Economics.
- Jarko Fidrmuc & Iikka Korhonen, 2009.
"The Impact of the Global Financial Crisis on Business Cycles in Asian Emerging Economies,"
CESifo Working Paper Series
2710, CESifo Group Munich.
- Fidrmuc, Jarko & Korhonen, Iikka, 2010. "The impact of the global financial crisis on business cycles in Asian emerging economies," Journal of Asian Economics, Elsevier, vol. 21(3), pages 293-303, June.
- Korhonen, Iikka & Fidrmuc , Jarko, 2009. "The impact of the global financial crisis on business cycles in Asian emerging economies," BOFIT Discussion Papers 11/2009, Bank of Finland, Institute for Economies in Transition.
- Arabinda Basistha, 2007.
"Trend-cycle correlation, drift break and the estimation of trend and cycle in Canadian GDP,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 40(2), pages 584-606, May.
- Arabinda Basistha, 2005. "Trend-Cycle Correlation, Drift Break and the Estimation of Trend and Cycle in Canadian GDP," Working Papers 05-07 Classification- JEL, Department of Economics, West Virginia University.
- Harvey, A.C. & Trimbur, T.M., 2001.
"General Model-based Filters for Extracting Cycles and Trends in Economic Time Series,"
Cambridge Working Papers in Economics
0113, Faculty of Economics, University of Cambridge.
- Andrew C. Harvey & Thomas M. Trimbur, 2003. "General Model-Based Filters for Extracting Cycles and Trends in Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 244-255, May.
- Tara M. Sinclair, 2009.
"The Relationships between Permanent and Transitory Movements in U.S. Output and the Unemployment Rate,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 41(2-3), pages 529-542, 03.
- Tom Doan, . "RATS programs to replicate Sinclair(2009) bivariate state-space model," Statistical Software Components RTZ00151, Boston College Department of Economics.
- Alwyn Young, 2003. "Gold into Base Metals: Productivity Growth in the People's Republic of China during the Reform Period," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1220-1261, December.
- Carsten A. Holz, 2006. "China'S Reform Period Economic Growth: How Reliable Are Angus Maddison'S Estimates? Response To Angus Maddison'S Reply," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(3), pages 471-475, 09.
- Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
- James C. Morley, 2007. "The Slow Adjustment of Aggregate Consumption to Permanent Income," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 615-638, 03.
- Cogley, Timothy & Nason, James M., 1995.
"Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 19(1-2), pages 253-278.
- Timothy Cogley & James M. Nason, 1993. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series: implications for business cycle research," Working Papers in Applied Economic Theory 93-01, Federal Reserve Bank of San Francisco.
- Gulasekaran Rajaguru & Tilak Abeysinghe, 2004.
"Quarterly real GDP estimates for China and ASEAN4 with a forecast evaluation,"
Journal of Forecasting,
John Wiley & Sons, Ltd., vol. 23(6), pages 431-447.
- Tilak Abeysinghe & Gulasekaran Rajaguru, 2003. "Quarterly Real GDP Estimates for China and ASEAN4 with a Forecast Evaluation," Departmental Working Papers wp0404, National University of Singapore, Department of Economics.
- Daisuke Nagakura, 2011.
"How Are Shocks to Trend and Cycle Correlated? A Simple Methodology for Unidentified Unobserved Components Models,"
Global COE Hi-Stat Discussion Paper Series
gd10-172, Institute of Economic Research, Hitotsubashi University.
- Daisuke Nagakura, 2008. "How Are Shocks to Trend and Cycle Correlated? A Simple Methodology for Unidentified Unobserved Components Models," IMES Discussion Paper Series 08-E-24, Institute for Monetary and Economic Studies, Bank of Japan.
- Stock, James H & Watson, Mark W, 1988. "Variable Trends in Economic Time Series," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 147-74, Summer.
- Xu, Xianchun, 2004. "China's gross domestic product estimation," China Economic Review, Elsevier, vol. 15(3), pages 302-322.
- Kwanho Shin & Chan-Hyun Sohn, 2006. "Trade and Financial Integration in East Asia: Effects on Co-movements," The World Economy, Wiley Blackwell, vol. 29(12), pages 1649-1669, December.
- Christian J. Murray, 2003. "Cyclical Properties of Baxter-King Filtered Time Series," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 472-476, May.
- Niall Ferguson & Moritz Schularick, 2007. "'Chimerica' and the Global Asset Market Boom," International Finance, Wiley Blackwell, vol. 10(3), pages 215-239, December.
- Pym Manopimoke, 2012. "Hong Kong Inflation Dynamics: Trend and Cycle Relationships with the U.S. and China," Working Papers 232012, Hong Kong Institute for Monetary Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kyle Renner).
If references are entirely missing, you can add them using this form.