Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57257
Authors: 
Dreger, Christian
Zhang, Yanqun
Year of Publication: 
2011
Series/Report no.: 
DIW Discussion Papers 1151
Abstract: 
The integration of China into the global economy is one of the most spectacular events in economic history. This paper investigates to what extent this process affects output growth and inflation in the advanced countries. A GVAR model is specified to explore interdependencies between business cycles in China and industrial countries, including the US, the euro area and Japan. For robustness, the results are compared to those obtained from leading structural models, such as NiGEM and OEF. Evidence is based on the responses to a Chinese demand shock arising from the recent fiscal stimulus program. The results show that the impact on output growth in the advanced economies can be quite substantial, especially for the Asian region. The expansionary effects in the US and the euro area responses are lower, as trade linkages are less intensive. The multipliers are also reduced by a sizeable effect on inflation, as Chinese firms participate in international production chains.
Subjects: 
GVAR
Chinese economy
shock transmission
JEL: 
E32
F15
C51
Document Type: 
Working Paper

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