The tale of two titans: US and China's distinct impact on the global economy

Lina Thomas

Finance Research Letters, 2023, vol. 58, issue PC

Abstract: This study employs a GVEC model to analyze the global influences of US and China's monetary policies. It reveals that a 25 basis point US interest rate hike prompts a -0.18 ppt change in foreign economies, predominantly indirectly via commodity price fluctuations and cross-country interactions. Conversely, China incites a -0.10 ppt direct effect, largely through the trade channel. In terms of foreign GDP fluctuations, the US accounts for a considerable 10.5 %, with its equity markets playing a significant role, compared to China's 2.3 % contribution. These results reveal distinct paths for US and China's global influence via financial and trade routes, respectively.

Keywords: Global VEC; Global shock transmission; Monetary policy; Spillover effects; US; China (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pc:s1544612323009431

DOI: 10.1016/j.frl.2023.104571

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