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Modelling and dynamic analysis of the domestic demand influence on the economic growth of China

Author

Listed:
  • Zilong Zhao

    (GIPSA-SYSCO - GIPSA - Systèmes non linéaires et complexité - GIPSA-DA - Département Automatique - GIPSA-lab - Grenoble Images Parole Signal Automatique - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INPG - Institut National Polytechnique de Grenoble - CNRS - Centre National de la Recherche Scientifique - UGA [2016-2019] - Université Grenoble Alpes [2016-2019])

  • Louis Job

    (PACTE - Pacte, Laboratoire de sciences sociales - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - CNRS - Centre National de la Recherche Scientifique - UGA [2016-2019] - Université Grenoble Alpes [2016-2019], IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble)

  • Luc Dugard

    (GIPSA-SLR - GIPSA - Systèmes linéaires et robustesse - GIPSA-DA - Département Automatique - GIPSA-lab - Grenoble Images Parole Signal Automatique - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INPG - Institut National Polytechnique de Grenoble - CNRS - Centre National de la Recherche Scientifique - UGA [2016-2019] - Université Grenoble Alpes [2016-2019])

  • Bogdan Robu

    (GIPSA-SYSCO - GIPSA - Systèmes non linéaires et complexité - GIPSA-DA - Département Automatique - GIPSA-lab - Grenoble Images Parole Signal Automatique - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INPG - Institut National Polytechnique de Grenoble - CNRS - Centre National de la Recherche Scientifique - UGA [2016-2019] - Université Grenoble Alpes [2016-2019])

Abstract

China's per capita disposable income has constantly increased in recent years, and that growth occurs at all levels of society, which indicates that this country is creating a large amount of consumer demand. We believe that the process of meeting these demands will profoundly affect the direction of China's economic development. This paper examines the Granger causality between economic growth, household final consumption (henceforth referred to as "Consumption"), inward foreign direct investment (FDI) and Export in China using annual data from 1985 to 2014. Cointegration test and vector error correction model (VECM) are used to identify long-term and short-term relationships. VECM is also used to find causal links between variables. The result shows there are bidirectional causalities between Consumption, FDI and GDP. Unidirectional causality from FDI to Export, from Export to Consumption and GDP. The change in the composition of FDI also reveals that as Consumption increases, FDI in high-tech domain goes up, especially in the high-tech service industry, which can have an effect on long-run economic growth and change the structure of China's Export.

Suggested Citation

  • Zilong Zhao & Louis Job & Luc Dugard & Bogdan Robu, 2018. "Modelling and dynamic analysis of the domestic demand influence on the economic growth of China," Post-Print hal-01980620, HAL.
    • Handle: RePEc:hal:journl:hal-01980620
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