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Growth in China and the US: Effects on a small commodity exporter economy

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  • Osborn, Denise R.
  • Vehbi, Tugrul

Abstract

This paper provides a comparative quantitative analysis of the relative effects of economic growth in the US and China on a small commodity exporting country, namely New Zealand. The framework is an SVAR model with an exogenous global block consisting of GDP growth in the two major international economies and world commodity price inflation; regional influences are controlled through the inclusion of Australian GDP growth, while the domestic block consists of GDP growth, inflation, interest rates and changes in the real exchange rate. Using a sample period from 1986 to 2011, we find that although growth spillovers to New Zealand GDP are substantially greater from the US than from China, nevertheless growth in China induces larger responses in the New Zealand real exchange rate than does the US. Commodity price responses to growth in each of the large economies are also explored, while time-varying estimates provide some evidence of increasing responses of commodity prices and the New Zealand real exchange rate to growth in China.

Suggested Citation

  • Osborn, Denise R. & Vehbi, Tugrul, 2015. "Growth in China and the US: Effects on a small commodity exporter economy," Economic Modelling, Elsevier, vol. 45(C), pages 268-277.
    • Handle: RePEc:eee:ecmode:v:45:y:2015:i:c:p:268-277
    DOI: 10.1016/j.econmod.2014.10.046
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    Cited by:

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    6. Bataa, Erdenebat & Osborn, Denise R. & Sensier, Marianne, 2018. "China's increasing global influence: Changes in international growth linkages," Economic Modelling, Elsevier, vol. 74(C), pages 194-206.
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    9. Michael Callaghan & Enzo Cassino & Tugrul Vehbi & Benjamin Wong, 2019. "Opening the toolbox: how does the Reserve Bank analyse the world?," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 82, pages 1-14, April.
    10. Zhang, Dayong & Lei, Lei & Ji, Qiang & Kutan, Ali M., 2019. "Economic policy uncertainty in the US and China and their impact on the global markets," Economic Modelling, Elsevier, vol. 79(C), pages 47-56.

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