Exploring the Asymmetrical Influence of Economic Growth, Oil Price, Consumer Price Index and Industrial Production on the Trade Deficit in China

Liurong Pan, Asad Amin (), Nian Zhu, Abbas Ali Chandio, Eric Yaw Naminse and Aadil Hameed Shah
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Liurong Pan: College of Economics and Management, Beibu Gulf University, Qinzhou 535011, China
Asad Amin: Postdoctoral Station of Management Science and Engineering, College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211100, China
Nian Zhu: College of Economics and Management, Beibu Gulf University, Qinzhou 535011, China
Abbas Ali Chandio: College of Economics, Sichuan Agricultural University, Chengdu 611130, China
Eric Yaw Naminse: College of Economics and Management, Beibu Gulf University, Qinzhou 535011, China
Aadil Hameed Shah: Department of Economics, Government Degree College, Ban Hafiz Jee Mianwali 42200, Pakistan

Sustainability, 2022, vol. 14, issue 23, 1-22

Abstract: The present study intends to scrutinize the asymmetrical influence of economic growth, industrial production, CPI (consumer price index) and oil price on the trade deficit for the People’s Republic of China’s economy. The Toda–Yamamoto causality, non-linear ARDL method, and quarterly data for 1995Q1 to 2021Q4 have been utilized to investigate the results. The estimated results confirm the uni-directional causality and presence of non-linear co-integration among variables under discussion. However, bound test analysis also reveals the long-run asymmetrical association among TD (trade deficit), IP (industrial production), oil price, and GDP growth, but not the CPI (consumer price index). Further, long-run asymmetrical outcomes highlight that a decrease (increase) in industrial production and an increase (decrease) in oil price and GDP growth rate increase (decrease) the trade deficit. Short-run asymmetrical outcomes reveal a similar trend to the long run, but the impact of all variables in the short run is insignificant, which means that linkages between the trade deficit and the explanatory variables are a long-run phenomenon in People’s Republic of China. Thus, in terms of policy, to reduce the trade deficit, it is necessary to focus on attaining standardized GDP growth, increasing industrial-sector production using advanced technology, and replacing oil-using energy sources with green technology (solar panels, wind farm energy).

Keywords: consumer price index; China; economic development; NARDL; oil prices; trade (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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