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Financial Integration and China's Global Impact

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  • Rod Tyers

    (Business School, University of Western Australia, and Research School of Economics Australian National University, and Centre for Applied Macroeconomic Analysis Crawford School of Government Australian National University)

Abstract

Product and financial market integration determine the global implications of China’s recent growth surge and its on-going transition from export led growth. These alter China’s structural imbalance (its excess product supply and excess saving), which in turn shifts the international terms of trade, changing asset yields causing deflationary and then inflationary pressures abroad. The effects are here quantified using a global macro model with national portfolio rebalancing, in which asset differentiation is used to index financial integration. The growth surge is found to have conferred on the advanced economies gains in their terms of trade, incompletely offset by structural unemployment. By contrast, the global effects of the transition are shown to reverse some of these impacts and to be amplified by further financial integration, particularly for the US.

Suggested Citation

  • Rod Tyers, 2015. "Financial Integration and China's Global Impact," Economics Discussion / Working Papers 15-02, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:15-02
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    JEL classification:

    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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