Hong Kong's growth synchronization with China and the US: A trend and cycle analysis

Dong He, Wei Liao and Tommy Wu ()

Journal of Asian Economics, 2015, vol. 40, issue C, 10-28

Abstract: This paper investigates the synchronization of Hong Kong's economic growth with mainland China and the US. We identify trends of economic growth based on the permanent income hypothesis. Specifically, we first confirm whether real consumption in Hong Kong and mainland China satisfies the permanent income hypothesis, at least in a weak form. We then identify the permanent and transitory components of income of each economy using a simple state-space model. We use structural vector autoregression models to analyze how permanent and transitory shocks originating from mainland China and the US affect the Hong Kong economy, and how such influences evolve over time. Our main findings suggest that transitory shocks from the US remain a major driving force behind Hong Kong's business cycle fluctuations. On the other hand, permanent shocks from mainland China have a larger impact on Hong Kong's trend growth.

Keywords: Business cycle synchronization; Permanent income hypothesis; Stochastic trend; Structural vector autoregression (search for similar items in EconPapers)
JEL-codes: C32 E21 E32 F44 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1049007815000792
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Hong Kong’s Growth Synchronization with China and the U.S.: A Trend and Cycle Analysis (2015)
Working Paper: Hong Kong's Growth Synchronisation with China and the U.S.: A Trend and Cycle Analysis (2014)
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:eee:asieco:v:40:y:2015:i:c:p:10-28

DOI: 10.1016/j.asieco.2015.08.003

Access Statistics for this article

Journal of Asian Economics is currently edited by C. Wiemer

More articles in Journal of Asian Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().