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The Impact of a People’s Republic of China Slowdown on Commodity Prices and Detecting the Asymmetric Responses of Economic Activity in Asian Countries to Commodity Price Shocks

Listed author(s):
  • Ghoshray, Atanu

    ()

    (Newcastle University Business School, Newcastle-upon-Tyne)

  • Pundit, Madhavi

    ()

    (Asian Development Bank)

The recent slowdown of the People’s Republic of China (PRC) has led to question to what extent the PRC demand of commodities can have an impact on commodity prices. We take into account the fact that commodity prices are characterized by structural breaks, and to this end we make use of novel econometric procedures incorporating the Flexible Fourier Form when testing for causal relations between the PRC slowdown and commodity prices. We find varying degrees of response of the PRC slowdown on different commodity prices. Further, this study determines whether the economic growth in selected developing and emerging Asian countries that are heavily dependent on commodities respond in an asymmetric manner to positive commodity price shocks as opposed to negative price shocks. Adopting a structural dynamic regression and censoring positive and negative shocks, we find limited evidence of any asymmetric response of economic activity to positive and negative commodity price shocks.

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Paper provided by Asian Development Bank in its series ADB Economics Working Paper Series with number 493.

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Length: 34 pages
Date of creation: 27 Jul 2016
Handle: RePEc:ris:adbewp:0493
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  1. Ludovic Gauvin & Cyril Rebillard, 2015. "Towards Recoupling? Assessing the Global Impact of a Chinese Hard Landing through Trade and Commodity Price Channels," EconomiX Working Papers 2015-21, University of Paris Nanterre, EconomiX.
  2. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
  3. Sun, Jingwei & Shi, Wendong, 2015. "Breaks, trends, and unit roots in spot prices for crude oil and petroleum products," Energy Economics, Elsevier, vol. 50(C), pages 169-177.
  4. Paulo M. M. Rodrigues & A. M. Robert Taylor, 2012. "The Flexible Fourier Form and Local Generalised Least Squares De-trended Unit Root Tests-super-," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(5), pages 736-759, October.
  5. Dabin Wang & William G. Tomek, 2007. "Commodity Prices and Unit Root Tests," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 873-889.
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