[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/chieco/v20y2009i3p508-526.html
   My bibliography  Save this article

The role of China in global external imbalances: Some further evidence

Author

Listed:
  • Bagnai, Alberto
Abstract
The large imbalances in the current account positions of the US and the Asian economies are seen by most scholars as the main threat to an orderly development of the global economy. While the opinions on the most likely evolution of these imbalances and on their sustainability do differ across observers, ranging from catastrophic to rather optimistic views, almost all agree that some adjustment will have to take place in the near future, and that this adjustment will involve, among other things, a rebalancing of saving and demand across the globe. As an outcome of this process, China shall increasingly supplement the US in the role of engine of global economic growth. Using a global macroeconometric model, we examine the impact on this adjustment process of a number of shocks originating in the Chinese economy, including an expansionary fiscal shock, a revaluation of the renmimbi, and an expansion of internal demand following an acceleration in the process of rural-urban migration. The analysis focuses on two related points: how will these shocks affect the medium-run evolution of transpacific imbalances, and what will their impact be on global economic growth. The simulations allow us to track the impact of these shocks on the different poles of the world economy, and to assess their relative contribution to the task of reducing global imbalances without interrupting global economic growth.

Suggested Citation

  • Bagnai, Alberto, 2009. "The role of China in global external imbalances: Some further evidence," China Economic Review, Elsevier, vol. 20(3), pages 508-526, September.
    • Handle: RePEc:eee:chieco:v:20:y:2009:i:3:p:508-526
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1043-951X(08)00094-1
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. repec:bla:scandj:v:78:y:1976:i:2:p:200-224 is not listed on IDEAS
    2. Alberto Bagnai, 2006. "Structural breaks and the twin deficits hypothesis," International Economics and Economic Policy, Springer, vol. 3(2), pages 137-155, November.
    3. Fagerberg, Jan & Srholec, Martin & Knell, Mark, 2007. "The Competitiveness of Nations: Why Some Countries Prosper While Others Fall Behind," World Development, Elsevier, vol. 35(10), pages 1595-1620, October.
    4. Knight, John & Song, Lina, 2006. "Towards a Labour Market in China," OUP Catalogue, Oxford University Press, number 9780199215553.
    5. Zhang, Jian & Fung, Hung-Gay, 2006. "Winners and losers: Assessing the impact of Chinese Yuan appreciation," Journal of Policy Modeling, Elsevier, vol. 28(9), pages 995-1009, December.
    6. Chinn, Menzie D. & Ito, Hiro, 2007. "Current account balances, financial development and institutions: Assaying the world "saving glut"," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 546-569, June.
    7. Michael P. Dooley & David Folkerts-Landau & Peter M. Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
    8. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    9. Zhang, Kevin Honglin & Song, Shunfeng, 2003. "Rural-urban migration and urbanization in China: Evidence from time-series and cross-section analyses," China Economic Review, Elsevier, vol. 14(4), pages 386-400.
    10. Jong-Wha Lee & Warwick J. McKibbin & Yong Chul Park, 2004. "Transpacific trade imbalances: Causes and cures," CAMA Working Papers 2004-14, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    11. John Knight & Jinjun Xue, 2006. "How High is Urban Unemployment in China?," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 4(2), pages 91-107.
    12. Douven, Rudy & Peeters, Marga, 1998. "GDP-spillovers in multi-country models," Economic Modelling, Elsevier, vol. 15(2), pages 163-195, April.
    13. Holz, Carsten A., 2006. "New capital estimates for China," China Economic Review, Elsevier, vol. 17(2), pages 142-185.
    14. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    15. Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2008. "An Equilibrium Model of "Global Imbalances" and Low Interest Rates," American Economic Review, American Economic Association, vol. 98(1), pages 358-393, March.
    16. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 624-660, June.
    17. Alberto Bagnai, 2004. "Dynamic Paths of the European Economy: Simulations with an Aggregate Model of the EMU as a Part of the World Economy," International Economic Association Series, in: Alan V. Deardorff (ed.), The Past, Present and Future of the European Union, chapter 9, pages 197-213, Palgrave Macmillan.
    18. Cooper, Richard N., 2006. "Living with global imbalances: A contrarian view," Journal of Policy Modeling, Elsevier, vol. 28(6), pages 615-627, September.
    19. Rawski, Thomas G., 2001. "What is happening to China's GDP statistics?," China Economic Review, Elsevier, vol. 12(4), pages 347-354.
    20. World Bank, 2006. "World Development Indicators 2006," World Bank Publications - Books, The World Bank Group, number 8151.
    21. Ronald McKinnon, 2007. "Why China Should Keep Its Dollar Peg," International Finance, Wiley Blackwell, vol. 10(1), pages 43-70, March.
    22. Devereux, Michael B. & Genberg, Hans, 2007. "Currency appreciation and current account adjustment," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 570-586, June.
    23. Virginie Coudert & Cécile Couharde, 2005. "Real Equilibrium Exchange Rate in China," Working Papers 2005-01, CEPII research center.
    24. Barry EICHENGREEN & Hui TONG, 2006. "How China is Reorganizing the World Economy," Asian Economic Policy Review, Japan Center for Economic Research, vol. 1(1), pages 73-97, June.
    25. repec:bla:ecorec:v:78:y:2002:i:243:p:375-80 is not listed on IDEAS
    26. Chou, W. L. & Shih, Y. C., 1998. "The Equilibrium Exchange Rate of the Chinese Renminbi," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 165-174, March.
    27. Gregory, Allan W & Hansen, Bruce E, 1996. "Tests for Cointegration in Models with Regime and Trend Shifts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 555-560, August.
    28. Leonardo Bartolini & Amartya Lahiri, 2006. "Twin deficits, twenty years later," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 12(Oct).
    29. Vines, David & Scheibe, Jörg, 2005. "A Phillips Curve for China," CEPR Discussion Papers 4957, C.E.P.R. Discussion Papers.
    30. Wing Thye Woo, 2006. "The Structural Nature of Internal and External Imbalances in China," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 4(1), pages 1-19.
    31. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
    32. Kenneth F. Wallis, 1993. "On Macroeconomic Policy and Macroeconometric Models," The Economic Record, The Economic Society of Australia, vol. 69(2), pages 113-130, June.
    33. repec:bla:ecorec:v:69:y:1993:i:205:p:113-30 is not listed on IDEAS
    34. Desiree A. Desierto & Geoffrey M. Ducanes, 2013. "Philippines," Chapters, in: Hal Hill & Maria Socorro Gochoco-Bautista (ed.), Asia Rising, chapter 13, pages 385-407, Edward Elgar Publishing.
    35. Catherine L. Mann, 2002. "Perspectives on the U.S. Current Account Deficit and Sustainability," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 131-152, Summer.
    36. Tsang, Shu-ki & Ma, Yue, 1997. "Simulating the impact of foreign capital in an open-economy macroeconomic model of China," Economic Modelling, Elsevier, vol. 14(3), pages 435-478, July.
    37. Bagnai, Alberto & Carlucci, Francesco, 2003. "An aggregate model for the European Union," Economic Modelling, Elsevier, vol. 20(3), pages 623-649, May.
    38. Guillaume Gaulier & Françoise Lemoine & Deniz Ünal-Kesenci, 2005. "China’s Integration in East Asia: Production Sharing, FDI & High-Tech Trade," Working Papers 2005-09, CEPII research center.
    39. Zhong Zhao, 2005. "Migration, Labor Market Flexibility, and Wage Determination in China: A Review," Labor and Demography 0507009, University Library of Munich, Germany.
    40. Nouriel Roubini, 2007. "Why China Should Abandon Its Dollar Peg," International Finance, Wiley Blackwell, vol. 10(1), pages 71-89, March.
    41. Soyoung Kim & Jong-Wha Lee, 2007. "Demographic Changes, Saving, and Current Account in East Asia," Asian Economic Papers, MIT Press, vol. 6(2), pages 22-53, Spring/Su.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Cesena: Goofy e Qui, Quo e Qua
      by Alberto Bagnai in Goofynomics on 2012-07-05 04:03:00
    2. Facciamo i conti
      by Alberto Bagnai in Goofynomics on 2014-02-25 06:03:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Du, Yuxin & Teixeira, Aurora A.C., 2012. "A bibliometric account of Chinese economics research through the lens of the China Economic Review," China Economic Review, Elsevier, vol. 23(4), pages 743-762.
    2. Luigi Bonatti & Andrea Fracasso, 2009. "The evolution of the Sino-American Co-dependency: modelling a regime switch in a growth setting," Department of Economics Working Papers 0905, Department of Economics, University of Trento, Italia.
    3. YUAN, Chunming & CHEN, Ruo, 2015. "Policy transmissions, external imbalances, and their impacts: Cross-country evidence from BRICS," China Economic Review, Elsevier, vol. 33(C), pages 1-24.
    4. Bénassy-Quéré, Agnès & Carton, Benjamin & Gauvin, Ludovic, 2013. "China and global rebalancing: A two-country approach," China Economic Review, Elsevier, vol. 26(C), pages 118-139.
    5. Bénassy-Quéré, Agnès & Carton, Benjamin & Gauvin, Ludovic, 2013. "China and global rebalancing: A two-country approach," China Economic Review, Elsevier, vol. 26(C), pages 118-139.
    6. Konstantinos N. Konstantakis & Panayotis G. Michaelides & Livia Chatzieleftheriou & Arsenios‐Georgios N. Prelorentzos, 2022. "Crisis and the Chinese miracle: A network—GVAR model," Bulletin of Economic Research, Wiley Blackwell, vol. 74(3), pages 900-921, July.
    7. Bonga-Bonga, Lumengo, 2017. "Fiscal policy, Monetary policy and External imbalances: Cross-country evidence from Africa’s three largest economies (Nigeria, South Africa and Egypt)," MPRA Paper 79490, University Library of Munich, Germany.
    8. Shouhao Li & Weiquan Cheng & Jingjing Li & Hao Shen, 2021. "Corporate Social Responsibility Development and Climate Change: Regional Evidence of China," Sustainability, MDPI, vol. 13(21), pages 1-20, October.
    9. Jan Nederveen Pieterse, 2011. "Forum 2011," Development and Change, International Institute of Social Studies, vol. 42(1), pages 22-48, January.
    10. repec:hal:pseose:hal-00825239 is not listed on IDEAS
    11. Gordon Menzies & Xiaolin Xiao, 2012. "Non-traded Factor Appreciation in China," Working Paper Series 2, Economics Discipline Group, UTS Business School, University of Technology, Sydney.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Luigi Bonatti & Andrea Fracasso, 2009. "The evolution of the Sino-American Co-dependency: modelling a regime switch in a growth setting," Department of Economics Working Papers 0905, Department of Economics, University of Trento, Italia.
    2. Holmes, Mark J., 2011. "Threshold cointegration and the short-run dynamics of twin deficit behaviour," Research in Economics, Elsevier, vol. 65(3), pages 271-277, September.
    3. Muhammad Ali Nasir & Mary Leung, 2021. "US trade deficit, a reality check: New evidence incorporating asymmetric and non‐linear effects of exchange rate dynamics," The World Economy, Wiley Blackwell, vol. 44(3), pages 818-836, March.
    4. Magazzino, Cosimo & Drago, Carlo & Schneider, Nicolas, 2023. "Evidence of supply security and sustainability challenges in Nigeria’s power sector," Utilities Policy, Elsevier, vol. 82(C).
    5. Mariam Camarero & Josep Lluís Carrion‐i‐Silvestre & Cecilio Tamarit, 2021. "External imbalances from a GVAR perspective," The World Economy, Wiley Blackwell, vol. 44(11), pages 3202-3245, November.
    6. Félix Jiménez, 2018. "Capacidad productiva, cambio técnico y productividad: Estimaciones alternativas del producto de largo plazo," Documentos de Trabajo / Working Papers 2018-454, Departamento de Economía - Pontificia Universidad Católica del Perú.
    7. Soyoung Kim & Yoonbai Kim, 2016. "The RMB Debate: Empirical Analysis on the Effects of Exchange Rate Shocks in China and Japan," The World Economy, Wiley Blackwell, vol. 39(10), pages 1539-1557, October.
    8. Das, Dilip K., 2009. "The evolution of renminbi yuan and the protracted debate on its undervaluation: An integrated review," Journal of Asian Economics, Elsevier, vol. 20(5), pages 570-579, September.
    9. Arusha Cooray & Marcella Lucchetta & Antonio Paradiso, 2013. "A knowledge economy approach in empirical growth models for the Nordic countries," Economics Working Papers wp13-06, School of Economics, University of Wollongong, NSW, Australia.
    10. Charles O. Manasseh & Timothy E. Mathew & Jonathan E. Ogbuabor, 2017. "Investigating the Nexus between Institutional Quality and Stock Market Development in Nigeria: An Autoregressive Distributed Lag (ARDL) Approach," African Development Review, African Development Bank, vol. 29(2), pages 272-292, June.
    11. Md Shahiduzzaman & Allan Layton & Khorshed Alam, 2015. "On the contribution of information and communication technology to productivity growth in Australia," Economic Change and Restructuring, Springer, vol. 48(3), pages 281-304, November.
    12. Wim Suyker & Henri de Groot, 2006. "China and the Dutch economy," CPB Document 127, CPB Netherlands Bureau for Economic Policy Analysis.
    13. Arusha Cooray & Antonio Paradiso, 2012. "The level and growth effects in empirical growth models for the Nordic countries: A knowledge economy approach," CAMA Working Papers 2012-36, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    14. Alberto Bagnai & Silvia Galli & Eleonora Pierucci & Simone Raimondi, 2004. "Narrowing the US twin deficits: simulations with a world macroeconometric model," International Trade 0411004, University Library of Munich, Germany.
    15. Philippe Andrade & Catherine Bruneau, 2002. "Excess returns, portfolio choices and exchange rate dynamics. The yen/dollar case, 1980–1998," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(3), pages 233-256, July.
    16. Nidhaleddine Ben Cheikh & Christophe Rault, 2016. "Recent estimates of exchange rate pass-through to import prices in the euro area," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 69-105, February.
    17. BIKAI, J. Landry & OWOUNDI F., Ferdinand, 2016. "Does the choice of an exchange rate regime limits exchange rate misalignments? The example of sub-Saharan African countries," MPRA Paper 89110, University Library of Munich, Germany.
    18. Çatık, Abdurrahman Nazif & Gök, Barış & Akseki, Utku, 2015. "A nonlinear investigation of the twin deficits hypothesis over the business cycle: Evidence from Turkey," Economic Systems, Elsevier, vol. 39(1), pages 181-196.
    19. Joscha Beckmann & Ansgar Belke & Michael Kühl, 2009. "How Stable Are Monetary Models of the Dollar-Euro Exchange Rate?: A Time-Varying Coefficient Approach," Discussion Papers of DIW Berlin 944, DIW Berlin, German Institute for Economic Research.
    20. Yoonbai Kim & Gil Kim, 2012. "The Renminbi Debate: A Review of Issues and Search for Resolution," Chapters, in: Jehoon Park & T. J. Pempel & Geng Xiao (ed.), Asian Responses to the Global Financial Crisis, chapter 4, Edward Elgar Publishing.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:20:y:2009:i:3:p:508-526. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/chieco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.