Examining the impact of China's fiscal and monetary policy measures on global economic growth : A VAR analysis
Engström, Andreas (2023)
Engström, Andreas
2023
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https://urn.fi/URN:NBN:fi-fe2023051544523
https://urn.fi/URN:NBN:fi-fe2023051544523
Tiivistelmä
This study examines the impact of China's fiscal and monetary policies on countries worldwide and the OECD region over two separate periods (2001-2010 and 2011-2019) to provide a comprehensive understanding of how China's economic policies affect the global economy.
The study includes a literature review of fiscal and monetary policy theories and prior research on China's policies. It also introduces a hypothetical model to explain how China's expansionary policy affects itself and the outside world. Using a vector autoregression (VAR) model with Granger's causality test and orthogonalized impulse response functions, the study's results indicate that the impact of China's policies on other countries is more significant in the later period. The study reveals that China's monetary policy variables, such as M2, domestic credit, RMB per USD, market capitalization, and total imports, significantly impact other countries, with more potent effects observed in the later period. Additionally, China's fiscal policy variables, including direct investment abroad and taxes, significantly impact other countries' GDP and CPI, with stronger effects observed in the later period. Furthermore, the study highlights the impact of China's growth indicators, specifically the consumer price index (CPI) and producer price index (PPI), on other countries.
The results show that China's PPI has a more substantial impact on outside countries than CPI. Overall, this study emphasizes the significant role of China's economic policies in the global economy and provides insights into the trends and changes in China's economic impact on other countries over time. These findings can be used by policymakers and investors to manage and respond to China's economic policies in the future.
The study includes a literature review of fiscal and monetary policy theories and prior research on China's policies. It also introduces a hypothetical model to explain how China's expansionary policy affects itself and the outside world. Using a vector autoregression (VAR) model with Granger's causality test and orthogonalized impulse response functions, the study's results indicate that the impact of China's policies on other countries is more significant in the later period. The study reveals that China's monetary policy variables, such as M2, domestic credit, RMB per USD, market capitalization, and total imports, significantly impact other countries, with more potent effects observed in the later period. Additionally, China's fiscal policy variables, including direct investment abroad and taxes, significantly impact other countries' GDP and CPI, with stronger effects observed in the later period. Furthermore, the study highlights the impact of China's growth indicators, specifically the consumer price index (CPI) and producer price index (PPI), on other countries.
The results show that China's PPI has a more substantial impact on outside countries than CPI. Overall, this study emphasizes the significant role of China's economic policies in the global economy and provides insights into the trends and changes in China's economic impact on other countries over time. These findings can be used by policymakers and investors to manage and respond to China's economic policies in the future.