Macroeconomic consequences of the real-financial nexus: Imbalances and spillovers between China and the U.S.

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Title: Macroeconomic consequences of the real-financial nexus: Imbalances and spillovers between China and the U.S.
Author: Pang, Ke ; Siklos, Pierre L.
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 2/2015
Year of publication: 2015
Publication date: 18.1.2015
Published in: Published in Journal of International Money and Finance, Volume 65, July 2016, Pages 195–212
Pages: 33
Subject (yso): rahapolitiikka; ekonometriset mallit
Keywords: Bofit-kokoelma; Kiina; China; USA;
JEL: E58; E52; C32
Abstract: ​Relying on quarterly data since 1998 we estimate, for China and the U.S., small scale econometric models that economize on the number of variables employed and yet are rich enough to provide useful insights about spillover effects between the two countries under different maintained assumptions about the exogeneity of the macroeconomic relationship between them. We conclude that inflation in China responds to credit shocks. Indeed, the monetary transmission mechanism in China resembles that of the US even if the channels through which monetary policy affects their respective economies differ. We also find that the monetary policy stance of the PBOC was helpful in mitigating the impact of the global financial crisis of 2008-9. Finally, spillovers from the US to China are significant and originate from both through the real and financial sectors of the US economy. Publication keywords: spillovers, monetary policy in China, dynamic factor models, credit
Rights: https://helda.helsinki.fi/bof/copyright


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