 U.S. Economic Uncertainty Shocks and China’s Economic Activities: A Time-Varying PerspectiveLin Liu SAGE Open, 2021, vol. 11, issue 3, 21582440211032672 Abstract: This paper presents new empirical evidence concerning the time-varying responses of China’s macroeconomy to U.S. economic uncertainty shocks through a novel TVP-VAR model. The results robustly reveal that a rise in U.S. economic uncertainty would exert sizable, persistent, and significant detrimental effects on China’s gross domestic product (GDP), price level, and short-term interest rate during the period when common shocks take place, such as the global financial crisis around 2008, whereas small and transient effects in the tranquil times. Therefore, China should diversify its international linkages and gradually reduce the dependence on the United States into a certain range to shield the domestic economy, as well as improve the independence of monetary policy. Furthermore, to withstand unfavorable external shocks, China should be prudent on greater opening-up and carry out more intensive intervention when common shocks hit the world economy. Finally, investors should be alert to the potential detrimental impact of U.S. economic uncertainty on Chinese assets’ fundamentals. Keywords: economic uncertainty; global spillovers; China’s macroeconomy; TVP-VAR; stochastic volatility (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:11:y:2021:i:3:p:21582440211032672 DOI: 10.1177/21582440211032672 Access Statistics for this article More articles in SAGE Open |
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