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An analysis of the impact of China’s macroeconomic performance on its trade partners: Evidence based on the GVAR model

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  • Aftab Alam
  • Jingmei Ma
  • Ibrar Hussain
  • Rizwan Fazal

Abstract

Economic strategies and planning are critical to a country’s growth and development. China, like many other countries, is seeking the most cost-effective trade deals. Using the Global Vector Auto Regression (GVAR) model, this study examined the impact of a shock to China’s macroeconomic factors on trading economies. The major findings reveal that there is no co-movement between the shock in Chinese gross domestic product (GDP) and German macroeconomic indicators; however, the shock has a positive and substantial influence on Japan’s GDP and Unites States (US)’ exchange rate. It is also worth noting that a shock to Chinese trade volume is more susceptible and more disturbing than a shock to US trade volume since it reduces trade volume and causes the Ren Min Bi (RMB) to devalue permanently. Furthermore, the analysis shows that Chinese stock prices have a major influence on German economy since China’s GDP, trade volume, and currency appreciate over time when its stock price rises. Finally, the exchange rate shock is beneficial to Germany as it boosts GDP and trade volume but has a negative influence on US stock prices. The current study is, therefore, expected to be a suitable beginning point for the governments and policymakers of trading partners to design an effective trade policy to minimize the impact on major economic variables.

Suggested Citation

  • Aftab Alam & Jingmei Ma & Ibrar Hussain & Rizwan Fazal, 2023. "An analysis of the impact of China’s macroeconomic performance on its trade partners: Evidence based on the GVAR model," PLOS ONE, Public Library of Science, vol. 18(1), pages 1-23, January.
  • Handle: RePEc:plo:pone00:0275859
    DOI: 10.1371/journal.pone.0275859
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    References listed on IDEAS

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    1. repec:osf:osfxxx:cwvqb_v1 is not listed on IDEAS
    2. ABBAS, Shah & Nguyen, V.C. & YANFU, Zhu & Nguyen, Huu Tinh, 2020. "The Impact of China Exchange Rate Policy on its Trading Partners Evidence Based on the GVAR Model," OSF Preprints cwvqb, Center for Open Science.
    3. Pesaran M.H. & Schuermann T. & Weiner S.M., 2004. "Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 129-162, April.
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