The effects of China's wolf warrior diplomacy on the Chinese economy: a stock market perspective

Kerry Liu

International Journal of Diplomacy and Economy, 2023, vol. 9, issue 1, 5-22

Abstract: China's wolf warrior diplomacy has attracted worldwide attention since April 2020. There are discussions about the potential negative effects on the Chinese economy. Based on weekly Google Trends data during April 2020 to February 2022, this study creatively created a 'wolf warrior diplomacy index' used as a proxy measuring the aggressiveness or assertiveness of Chinese foreign policy. Using an exponential generalised autoregressive conditional heteroskedastic model, this study finds that the effects of the wolf warrior diplomacy index on the Chinese stock markets, i.e., a proxy variable for the Chinese economy, are insignificant. Various robustness tests and fundamental data also support this conclusion. The implication is that, while a country's foreign policy may potentially impact its economy, its decisive force may be primarily fundamental factors.

Keywords: China; wolf warrior diplomacy; COVID-19; EGARCH; exponential generalised autoregressive conditional heteroskedastic model; Shanghai stock exchange composite index; Google trends. (search for similar items in EconPapers)
Date: 2023
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