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WTO Membership for China and Its Impact on Growth, Investment and Consumption: A New Flexible Keynesian Approach

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Abstract

The November 2001 accession of China to the WTO promises increased investment (already the world’s second in 1998 and third in 1999) particularly from the EU into the country. This investment is crucial to China’s expanding trade with the rest of the world and will contribute significantly to its growth. The paper focuses on this nexus, presents a new and flexible approach to modelling the impact of China’s WTO membership on its investment and growth within the general framework of multi-sectoral economies (Tran Van Hoa, 1992), and applies it to study this anticipated impact using recent World Bank data. Our approach dominates in efficiency the CGE and other neo-classical methods (such as used in GTAP models) in its data-consistent structure. The paper then briefly describes the fundamentals of the new two-stage hierarchical information (2SHI) or empirical Bayes estimation and forecasting theory (Tran Van Hoa, 1985, 1986a, 1993b, Tran Van Hoa and Chaturvedi, 1988, 1990, 1997), summarises its superior MSE properties for forecasts and simulation, and reports substantive empirical findings on China’s investment and growth given its trade enhancement positions. As an illustration of applications of our approach, impact on China’s growth over a 7-year timeframe of a price reduction and increased government spending, assumed as a result of the country’s WTO membership, is also investigated and briefly its policy implications discussed.

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File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow012122.pdf
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Bibliographic Info

Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp02-04.

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Length: 22 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:uow:depec1:wp02-04

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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-3659
Fax: +612 4221-3725
Web page: http://business.uow.edu.au/econ/index.html
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Keywords: WTO; China; investment; growth; Keynesian approach; simulation;

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  1. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  2. Van Hoa, Tran, 1992. "Modelling output growth : A new approach," Economics Letters, Elsevier, vol. 38(3), pages 279-284, March.
  3. Harvie, Charles & van Hoa, Tran, 1993. "Long-term relationships of major macro-variables in a resource-related economic model of Australia : A cointegration analysis," Energy Economics, Elsevier, vol. 15(4), pages 257-261, October.
  4. Tran Van Hoa & Chaturvedi, A., 1999. "Performance of the 2SHI Estimator under the Generalised Pitman Nearness Criterion," Economics Working Papers wp99-4, School of Economics, University of Wollongong, NSW, Australia.
  5. Ullah, Aman & Ullah, Shobha, 1978. "Double k-Class Estimators of Coefficients in Linear Regression," Econometrica, Econometric Society, vol. 46(3), pages 705-22, May.
  6. Van Hoa, Tran, 1985. "The inadmissibility of the Stein estimator in normal multiple regression equations," Economics Letters, Elsevier, vol. 19(1), pages 39-42.
  7. Van Hoa, Tran & Chaturvedi, A., 1988. "The necessary and sufficient conditions for the uniform dominance of the two-stage stein estimators," Economics Letters, Elsevier, vol. 28(4), pages 351-355.
  8. Van Hoa, Tran, 1993. "The mixture properties of the 2SHI estimators in linear regression models," Statistics & Probability Letters, Elsevier, vol. 16(2), pages 111-115, January.
  9. Van Hoa, Tran, 1986. "Effects of monetary and fiscal policy on inflation : Some evidence from the J-test," Economics Letters, Elsevier, vol. 22(2-3), pages 187-190.
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