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The gains from catch-up for China and the US: An empirical framework

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  • Mardi Dungey
  • Denise R. Osborn

Abstract

As China becomes more closely entwined with the US, positive shocks in the US translate into positive outcomes for China, but the extent of gain for the US during the convergence process is less clear. We develop an empirical framework of two interacting open economies in which Chinese GDP per capita moves towards convergence and cointegration with the US, resulting in a time-varying structural VAR model. As a result, the impulse responses of the two countries to shocks are sensitive to the timing of the shock. The changing effects of US shocks are evident in the analysis, which shows that over the convergence process both the US and China unambiguously benefit from the catch-up process.

Suggested Citation

  • Mardi Dungey & Denise R. Osborn, 2019. "The gains from catch-up for China and the US: An empirical framework," CAMA Working Papers 2019-07, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2019-07
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    More about this item

    Keywords

    China; SVAR; convergence; catch-up;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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