BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 2/2015:
Macroeconomic consequences of the real-financial nexus: Imbalances and spillovers between China and the U.S.
Ke Pang ()
and Pierre L. Siklos ()
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.
Keywords: spillovers; monetary policy in China; dynamic factor models; credit; (follow links to similar papers)
JEL-Codes: C32; E52; E58; (follow links to similar papers)
33 pages, January 18, 2015
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