East Asian Economic Review

Korea Institute for International Economic Policy (대외경제정책연구원)
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International Transmission of Macroeconomic Uncertainty in China: A Time-varying Bayesian Global SVAR Approach

  • Received : 2024.01.09
  • Accepted : 2024.03.05
  • Published : 2024.03.30
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Abstract

This study empirically investigates the international transmission of China's uncertainty shocks. It estimates a time-varying parameter Bayesian global structural vector autoregressive model (TVP-BGVAR) using time series data for 33 countries to evaluate heterogeneous international linkage across countries and time. Uncertainty shocks are identified via sign restrictions. The empirical results reveal that an increase in uncertainty in China negatively affects the global economy, but those effects significantly vary over time. The effects of China's uncertainty shocks on the global economy have been significantly altered by China's WTO accession, the global financial crisis, and the recent US-China trade conflict. Furthermore, the effects of China's uncertainty shocks, typically on inflation, differ significantly across countries. Moreover, Trade openness appears crucial in explaining heterogeneous GDP responses across countries, whereas the international dimension of monetary policy appears to be important in explaining heterogeneous inflation responses across countries.

Keywords

Acknowledgement

This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2021S1A5A8068669).

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