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How trade drives fluctuations in macroeconomics in China – A multi-level dynamic factor approach

Author

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  • Hou, Jianghuai
  • Wang, Fang
  • Zhang, Ji

Abstract

Investigating how international trade with different regions and in different indus- tries affects the macroeconomy is crucial for policymaking and economic forecasting, particularly in the context of trade frictions. Using a dynamic hierarchical factor model (DHFM) and factor-augmented vector autoregression (FAVAR) model, we extract factors from extensive trade data to explore their impacts on and interactions with the macroeconomy.

Suggested Citation

  • Hou, Jianghuai & Wang, Fang & Zhang, Ji, 2025. "How trade drives fluctuations in macroeconomics in China – A multi-level dynamic factor approach," China Economic Review, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:chieco:v:91:y:2025:i:c:s1043951x25000513
    DOI: 10.1016/j.chieco.2025.102393
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    More about this item

    Keywords

    International trade; Macroeconomy; DHFM; FAVAR; Montary policy;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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