Faculty of Business Administration
Business Economics

The Effects of Macroeconomic Shocks on the Distribution of Provincial Output in China: Estimates from a Restricted VAR Model

Prof. Nicolaas Groenewold
Professor, Economics Discipline
UWA Business School
University of Western Australia


The extent and persistence of the inequality of the inter-regional distribution of output is an important policy issue in China and its sources have been the subject of considerable empirical research. Yet we have relatively little empirical knowledge of the effects on the regional distribution of output of shocks to national macroeconomic variables such as GDP and investment. This is an important gap in the empirical literature since much government macroeconomic policy seeks to influence GDP using instruments such as investment expenditure. It is likely that such national shocks will have differential regional impacts and so affect the regional output distribution. Policy-makers need to know the sign, size and timing of such effects before making policy decisions at the national level. We simulate the effects of aggregate shocks on individual provinces’ GDP within the framework of a vector autoregressive (VAR) model restricted in a manner following Lastrapes (Economics Letters, 2005). We use annual data from 1953 to 2012 to estimate the model which includes 28 of China’s provinces and simulate the effects on provincial outputs of shocks to aggregate output and investment. We find great diversity of effects across the provinces with discernible geographic patterns. We also observe variability across the effects of different aggregate shocks.

Date: October 20, 2014 (Monday)

Time: 15:00~16:30

Venue: Faculty of Business Administration, E22-1009

A Short Biography of Prof. Groenewold
Prof. Groenewold got his BEc (Hons I) & MEc in University of Tasmania and his MA & PhD in University of Western Ontario. He is the Professor in Economics Discipline at UWA Business School, University of Western Australia. In addition, he is also the Adjunct Professor, College of Economics at Jinan University, Guangzhou, China.