Exogeneity tests for the Chinese and U.S. external balance: Empirical evidence of the connection and the subprime crisis

Luiz Antônio de Lima Junior, Cláudio Roberto Foffano Vasconcelos, Wilson Luiz Rotatori Corrêa and José Simão Filho
Additional contact information
Luiz Antônio de Lima Junior: Federal University of Juiz de Fora, Brazil
Cláudio Roberto Foffano Vasconcelos: Federal University of Juiz de Fora, Brazil
Wilson Luiz Rotatori Corrêa: Federal University of Juiz de Fora, Brazil
José Simão Filho: Federal University of Juiz de Fora, Brazil

Economia, 2014, vol. 15, issue 3, 307_326

Abstract: This paper studies the global imbalances that occurred in the first years of the twenty-first century. The analysis encompasses the two biggest countries in the world: the U.S.A. and China. Many authors defend the assertion that the relationship between the current accounts of these two countries was one important cause of the subprime crisis. While the U.S.A. has increased its deficit in the last decade, China has improved its surplus. To investigate this relationship, this study performed exogeneity tests. Moreover, it conducted Granger causality tests following the approach of Toda–Yamamoto (1995). The results showed that there is a real causal relationship between the American and the Chinese external balance. Furthermore, the global imbalance between these two countries contributed to the subprime crisis, because the tests detected structural breaks for the external balances of America and China in 2008. The dynamics of the Chinese external balance changed after the subprime crisis.

Keywords: Exogeneity test; External balance; Macroeconomic imbalance (search for similar items in EconPapers)
JEL-codes: E20 F32 F40 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1517758014000216 (text/html)
http://ac.els-cdn.com/S1517758014000216/1-s2.0-S15 ... efc5371f6dbdd3b54c95 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:anp:econom:v:15:y:2014:3:307_326

Ordering information: This journal article can be ordered from
Secretaria da ANPEC Rua Prof Marcos Valdemar de Freitas Reis s/n Campus do Campus do Gragoatá, Bloco F Niterói, RJ 24210-201 Brazil
http://www.anpec.org.br/revista/

Access Statistics for this article

Economia is currently edited by Joaquim Pinto de Andrade

More articles in Economia from ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics] Secretaria da ANPEC Rua Prof Marcos Valdemar de Freitas Reis s/n Campus do Campus do Gragoatá, Bloco F Niterói, RJ 24210-201 Brazil. Contact information at EDIRC.
Bibliographic data for series maintained by Rodrigo Zadra Armond ().