Inter-regional spillovers in China: The importance of common shocks and the definition of the regions

Nicolaas Groenewold, G. Lee, A. Chen

Research output: Contribution to journalArticle

20 Citations (Scopus)

Abstract

This paper examines the question of inter-regional spillovers in China. We argue that this is a central question in Chinese economic policy, given the marked regional disparities that exist and the concern of policy-makers to ameliorate them.We analyse this question within the framework of a six-region vector-autoregressive model which we subject to extensive sensitivity analysis, with particular attention paid to the effects on the results of strong common output movements. We find the results of dynamic simulations to be importantly dependent on model specification; in particular, they are sensitive to the order in which the variables enter the model. After an assessment of various alternatives, we are able to specify a model with tolerable robustness by using data which has been purged of the effects of national output fluctuations. We find some expected but also some unexpected results. In the first category, the Yellow River and Changjiang River regions are found to have spillover effects on other regions although they are more extensive for the former; the South Western region has no significant spillover effects on the rest of the country, consistently with the results of previous research. However, in contrast both to other research and to our expectations, shocks to the South East region affect mainly the region itself with little spillover to the other regions. The same is true of the North East region while the North West region has extensive spillovers to other regions. We conclude that there is still much to be learned about the magnitude and timing of inter-regional spillovers before firm policy conclusions can be drawn.
Original languageEnglish
Pages (from-to)32-52
JournalChina Economic Review
Volume19
Issue number1
DOIs
Publication statusPublished - 2008

Fingerprint

Spillover
China
Common shocks
Spillover effects
Politicians
Output fluctuations
Sensitivity analysis
Economic policy
Dynamic simulation
Model specification
Robustness
Regional disparities
Vector autoregressive model

Cite this

@article{80e531565fee4bc79620fe1494518f3e,
title = "Inter-regional spillovers in China: The importance of common shocks and the definition of the regions",
abstract = "This paper examines the question of inter-regional spillovers in China. We argue that this is a central question in Chinese economic policy, given the marked regional disparities that exist and the concern of policy-makers to ameliorate them.We analyse this question within the framework of a six-region vector-autoregressive model which we subject to extensive sensitivity analysis, with particular attention paid to the effects on the results of strong common output movements. We find the results of dynamic simulations to be importantly dependent on model specification; in particular, they are sensitive to the order in which the variables enter the model. After an assessment of various alternatives, we are able to specify a model with tolerable robustness by using data which has been purged of the effects of national output fluctuations. We find some expected but also some unexpected results. In the first category, the Yellow River and Changjiang River regions are found to have spillover effects on other regions although they are more extensive for the former; the South Western region has no significant spillover effects on the rest of the country, consistently with the results of previous research. However, in contrast both to other research and to our expectations, shocks to the South East region affect mainly the region itself with little spillover to the other regions. The same is true of the North East region while the North West region has extensive spillovers to other regions. We conclude that there is still much to be learned about the magnitude and timing of inter-regional spillovers before firm policy conclusions can be drawn.",
author = "Nicolaas Groenewold and G. Lee and A. Chen",
year = "2008",
doi = "10.1016/j.chieco.2007.10.002",
language = "English",
volume = "19",
pages = "32--52",
journal = "China Economic Review (Amsterdam)",
issn = "1043-951X",
publisher = "Academic Press",
number = "1",

}

Inter-regional spillovers in China: The importance of common shocks and the definition of the regions. / Groenewold, Nicolaas; Lee, G.; Chen, A.

In: China Economic Review, Vol. 19, No. 1, 2008, p. 32-52.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Inter-regional spillovers in China: The importance of common shocks and the definition of the regions

AU - Groenewold, Nicolaas

AU - Lee, G.

AU - Chen, A.

PY - 2008

Y1 - 2008

N2 - This paper examines the question of inter-regional spillovers in China. We argue that this is a central question in Chinese economic policy, given the marked regional disparities that exist and the concern of policy-makers to ameliorate them.We analyse this question within the framework of a six-region vector-autoregressive model which we subject to extensive sensitivity analysis, with particular attention paid to the effects on the results of strong common output movements. We find the results of dynamic simulations to be importantly dependent on model specification; in particular, they are sensitive to the order in which the variables enter the model. After an assessment of various alternatives, we are able to specify a model with tolerable robustness by using data which has been purged of the effects of national output fluctuations. We find some expected but also some unexpected results. In the first category, the Yellow River and Changjiang River regions are found to have spillover effects on other regions although they are more extensive for the former; the South Western region has no significant spillover effects on the rest of the country, consistently with the results of previous research. However, in contrast both to other research and to our expectations, shocks to the South East region affect mainly the region itself with little spillover to the other regions. The same is true of the North East region while the North West region has extensive spillovers to other regions. We conclude that there is still much to be learned about the magnitude and timing of inter-regional spillovers before firm policy conclusions can be drawn.

AB - This paper examines the question of inter-regional spillovers in China. We argue that this is a central question in Chinese economic policy, given the marked regional disparities that exist and the concern of policy-makers to ameliorate them.We analyse this question within the framework of a six-region vector-autoregressive model which we subject to extensive sensitivity analysis, with particular attention paid to the effects on the results of strong common output movements. We find the results of dynamic simulations to be importantly dependent on model specification; in particular, they are sensitive to the order in which the variables enter the model. After an assessment of various alternatives, we are able to specify a model with tolerable robustness by using data which has been purged of the effects of national output fluctuations. We find some expected but also some unexpected results. In the first category, the Yellow River and Changjiang River regions are found to have spillover effects on other regions although they are more extensive for the former; the South Western region has no significant spillover effects on the rest of the country, consistently with the results of previous research. However, in contrast both to other research and to our expectations, shocks to the South East region affect mainly the region itself with little spillover to the other regions. The same is true of the North East region while the North West region has extensive spillovers to other regions. We conclude that there is still much to be learned about the magnitude and timing of inter-regional spillovers before firm policy conclusions can be drawn.

U2 - 10.1016/j.chieco.2007.10.002

DO - 10.1016/j.chieco.2007.10.002

M3 - Article

VL - 19

SP - 32

EP - 52

JO - China Economic Review (Amsterdam)

JF - China Economic Review (Amsterdam)

SN - 1043-951X

IS - 1

ER -