China and Global Macroeconomic Interdependence

Rod Tyers

    Research output: Contribution to journalArticlepeer-review

    12 Citations (Scopus)

    Abstract

    China is transitioning towards 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 macromodel 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 effects are deflationary in the United States and China, militating against contractionary US monetary policy. Monetary responses in the United States 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.

    Original languageEnglish
    Pages (from-to)1674-1702
    Number of pages29
    JournalWorld Economy
    Volume39
    Issue number11
    DOIs
    Publication statusPublished - 1 Nov 2016

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