China and Global Macroeconomic Interdependence

Rodney Tyers

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: China is transitioning toward more inward-focussed growth, causing adverse changes in the product and financial terms of trade in the advanced economies. At the same time, international financial markets tussle between tightening forces associated with the US recovery on the one hand and unconventional monetary expansion in Europe and Japan on the other. The way these shocks interact is examined in this paper using a global macro model with national portfolio rebalancing and asset differentiation and a representation of unconventional monetary policy. Results are found to be sensitive to the contributions of productivity and capital accumulation to China’s growth. When these are offered in realistic combination, the combined shocks are deflationary in the US and China, implying that contractionary US monetary policy is not imminent. Monetary responses in the US and China then combine with price targeting regimes in the EU and Japan to expand liquidity globally, amplifying impacts on financial markets and the global distribution of real investment.

Keywords: Global performance; US recovery; China’s transition; macro interdependence; financial integration (search for similar items in EconPapers)
Pages: 43 pages
Date: 2015-04
New Economics Papers: this item is included in nep-cna and nep-mac
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Related works:
Journal Article: China and Global Macroeconomic Interdependence (2016)
Working Paper: China and Global Macroeconomic Interdependence (2015)
Working Paper: China and Global Macroeconomic Interdependence (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2015-09

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