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The role of China in the world economy: evidence from a global VAR model

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  • Anna Sznajderska

Abstract

Since the 1980s, China has experienced very high economic growth, and its share in global trade has increased rapidly. Currently, however, the Chinese economy is rebalancing, and its growth is slowing. This paper investigates the spillover effects on other countries of a negative demand shock and negative stock price shock in the Chinese economy. We apply a global vector autoregressive model, which enables us to model international linkages between countries. Our results show that a one per cent negative China GDP shock reduces global growth by 0.22% in the short run. We find that GDP shock affects emerging economies more strongly than advanced economies. We also show that a stock price shock affects only emerging economies and does not affect advanced economies.

Suggested Citation

  • Anna Sznajderska, 2019. "The role of China in the world economy: evidence from a global VAR model," Applied Economics, Taylor & Francis Journals, vol. 51(15), pages 1574-1587, March.
  • Handle: RePEc:taf:applec:v:51:y:2019:i:15:p:1574-1587
    DOI: 10.1080/00036846.2018.1527464
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    References listed on IDEAS

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    More about this item

    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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F10 - International Economics - - Trade - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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