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What happens to Japan if China catches a cold?: A causal analysis of Chinese growth and Japanese growth


  • Chen, Pu
  • Hsiao, Chih-Ying


In this paper, we conduct an empirical study to investigate the directionality of the dependence between the Chinese economy and the Japanese economy. Taking a probabilistic causal approach, we infer the causal dependence among the Japanese economy and the Chinese economy based on observed data. We find evidence that the Chinese growth has both contemporaneous and temporal causal effects on Japanese growth, though the effect is very small. We did not find any evidence that the Japanese growth might have temporal or contemporaneous causal effect on Chinese growth.

Suggested Citation

  • Chen, Pu & Hsiao, Chih-Ying, 2008. "What happens to Japan if China catches a cold?: A causal analysis of Chinese growth and Japanese growth," Japan and the World Economy, Elsevier, vol. 20(4), pages 622-638, December.
  • Handle: RePEc:eee:japwor:v:20:y:2008:i:4:p:622-638

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    References listed on IDEAS

    1. Toda, Hiro Y & Phillips, Peter C B, 1993. "Vector Autoregressions and Causality," Econometrica, Econometric Society, vol. 61(6), pages 1367-1393, November.
    2. Pu Chen & Peter Flaschel, 2005. "Keynesian Dynamics and the Wage–Price Spiral: Identifying Downward Rigidities," Computational Economics, Springer;Society for Computational Economics, vol. 25(1), pages 115-142, February.
    3. Choi, In, 2005. "Subsampling vector autoregressive tests of linear constraints," Journal of Econometrics, Elsevier, vol. 124(1), pages 55-89, January.
    4. Peter Spirtes & Clark Glymour & Richard Scheines, 2001. "Causation, Prediction, and Search, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262194406, July.
    5. Chen, Pu, 2010. "A time series causal model," MPRA Paper 24841, University Library of Munich, Germany.
    6. Hoover, Kevin D., 2005. "Automatic Inference Of The Contemporaneous Causal Order Of A System Of Equations," Econometric Theory, Cambridge University Press, vol. 21(01), pages 69-77, February.
    7. Pu Chen & Carl Chiarella & Peter Flaschel & Willi Semmler, 2006. "Keynesian Macrodynamics and the Phillips Curve. An Estimated Baseline Macromodel for the U.S. Economy," Working Paper Series 147, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
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    Cited by:

    1. Dreger, Christian & Zhang, Yanqun, 2014. "Does the economic integration of China affect growth and inflation in industrial countries?," Economic Modelling, Elsevier, vol. 38(C), pages 184-189.
    2. Jacques Jaussaud & Serge Rey, 2012. "Long‐Run Determinants Of Japanese Exports To China And The United States: A Sectoral Analysis," Pacific Economic Review, Wiley Blackwell, vol. 17(1), pages 1-28, February.


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