Does the spillover of China's economic growth exist? Evidence from emerging markets

ABSTRACT

This paper primarily investigates if China affects emerging markets economies triggered by its rapid economic growth and the trend of economic globalization over the world. Our results indicate that China's economic growth causes a significant spillover effect on the economic performances of emerging markets, varying across the detected structural break in 2006 and the degree of economic globalization between China and 25 emerging economies over the period 2000–2012. The results herein support the formation of an inseparable interdependence between China and those emerging economies.

KEYWORDS:

• Spillover
• emerging market
• globalization
• structural break

JEL codes:

• A1
• F5
• F6
• R1

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. We will discuss the influence of China's economic performance on EMEs by a theoretical model later.

2. For the setting of the cost function and the following proof, please refer to Bai, Ma, and Pan (2012).

3. Following the model specification of Bai, Ma, and Pan (2012) and to ensure the stationarity of all variables unanimously, we take a first difference of all variables.

4. In detecting structural breaks, the method of De Wachter and Tzavalis (2012) allows only one structural break. In addition, China has exhibited a dramatic economic performance since the mid-2000s. Therefore, we cut out the data over the sub-period 1995–1999.

5. We employ a trimming percentage of 15% (i.e., the years 2000, 2001, 2011, and 2012) as the general way for detecting structural breaks (see, for example, Bai and Perron 2003).

6. In other settings of maximal lag lengths (over 2), a better lag length varies for each of criteria.