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

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  • Andritzky, Jochen
  • Kassner, Bernhard
  • Reuter, Wolf Heinrich

Abstract

China's economy, the second largest in the world, is undergoing a fundamental transition. Its transition from a strong focus on investment and exports towards a larger share of consumption could have important ramifications for China's trading partners. Using China as a case study, this paper deploys a sectoral input-output (IO) analysis to take into account higher-round spillovers from a reduction of import demand or a shift in the composition of the Chinese economy. This approach demonstrates strong indirect effects that exceed by far the initial shock from direct trade links, reflecting China's integration into a closely knit global value chain. The result suggests that the ongoing transition in China will have important effects on the global economy.

Suggested Citation

  • Andritzky, Jochen & Kassner, Bernhard & Reuter, Wolf Heinrich, 2019. "Propagation of changes in demand through international trade: A case study of China," Munich Reprints in Economics 78292, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:78292
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    Cited by:

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    2. Pahl, Stefan & Brandi, Clara & Schwab, Jakob & Stender, Frederik, 2020. "Cling together, swing together: The contagious effects of COVID-19 on developing countries through global value chains," IDOS Discussion Papers 21/2020, German Institute of Development and Sustainability (IDOS).
    3. Bofinger, Peter & Schnabel, Isabel & Feld, Lars P. & Schmidt, Christoph M. & Wieland, Volker, 2016. "Zeit für Reformen. Jahresgutachten 2016/17 [Time for Reforms. Annual Report 2016/17]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201617.
    4. Stefan Pahl & Clara Brandi & Jakob Schwab & Frederik Stender, 2022. "Cling together, swing together: The contagious effects of COVID‐19 on developing countries through global value chains," The World Economy, Wiley Blackwell, vol. 45(2), pages 539-560, February.

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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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