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China and Global Macroeconomic Interdependence

  • Rod TYERS

China's economy is now a member of the small group of large economic regions that interact strategically over macroeconomic policy. Critics see it as having developed at the expense of both investment and employment in the US, Europe and Japan while proponents emphasise improvements in their terms of trade and reductions to the cost of financing that stem from China's supply of light manufactures, its demand for Western capital and luxury goods and its high saving. Insights into the international implications of China's growth and saving are here derived from a simple global general equilibrium model that embodies elemental short run macroeconomic behaviour. The model emphasises bilateral linkages via both trade and investment and so helps clarify the international effects of both China's expansion, its high saving and of the new "inward focus" of its macroeconomic policy regime. Foreign worker displacement and slow investment emerge as the key consequences of China's growth for the other large economies and its turn inward could indeed stimulate a resurgence of employment and investment there.

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File URL: https://cama.crawford.anu.edu.au/pdf/working-papers/2013/342013.pdf
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Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2013-34.

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Length: 45 pages
Date of creation: May 2013
Date of revision:
Handle: RePEc:een:camaaa:2013-34
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