Analysis of Economic Shock Effects between China and ASEAN: An Empirical Study Based on Multinational VAR

Abstract

ABSTRACT This paper investigates the interaction mechanism of economic and trade shocks between ASEAN (Association of Southeast Asian Nations) and China by building a GVAR model. The results indicate that the effects of China’s economic shocks on ASEAN are more distinct than ASEAN’s shocks on China. Negative shocks on China’s growth rate produce negative effects on ASEAN’s economic growth rate. The positive inflation shocks to China’s economy produce long-lasting and prominent impacts on ASEAN’s inflation rate and raise ASEAN’s import and export rate. When China’s export growth rate suffers a negative shock, ASEAN countries’ economic growth rate declines. When ASEAN countries suffer a negative shock, the effects on China’s growth rate, foreign trade, and inflation are quite moderate, but the renminbi depreciates rapidly.