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Chinese resource demand and the natural resource supplier

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Abstract

This paper provides empirical evidence on the effects of Chinese resource demand on the resource rich natural resource supplier using the example of Australia. A structural VAR model is used to examine the effects of Chinese resource demand, commodity prices and foreign output on the macroeconomy with a formally specified mining and resources exports sector. The key findings of the paper are that shocks to Chinese demand and commodity prices result in a sustained increase in commodity prices and mining investment and a positive impact on the resources sector. However, these shocks eventually lead to lower real domestic output with factors of production moving out of the non-resources sectors and into the resources sector, resulting in a fall in non-resource sector output which is not fully offset by the rise in resources sector output. The results also indicate some market power by the natural resource supplier.

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File URL: http://eprints.utas.edu.au/17027/1/2013-07_Chinese_Resource_Demand.pdf
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Bibliographic Info

Paper provided by University of Tasmania, School of Economics and Finance in its series Working Papers with number 17027.

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Length: 25 pages
Date of creation: 01 Jul 2013
Date of revision: 01 Jul 2013
Publication status: Published by the University of Tasmania. Discussion paper 2013-07
Handle: RePEc:tas:wpaper:17027

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Web page: http://www.utas.edu.au/economics-finance/
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Keywords: China; resource demand; commodity prices; mining investment; resources sector Speci?cation tests; weak instruments; bootstrap.;

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Cited by:
  1. Ratti, Ronald A & Vespignani, Joaquin L., 2013. "Commodity Prices and BRIC and G3 Liquidity: A SFAVEC Approach," Working Papers 17096, University of Tasmania, School of Economics and Finance, revised 09 Jan 2013.

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