Cointegration analysis of agriculture and non-agricultural sectors in the Chinese economy 1952-92

Abstract

A vector autoregression (VAR) model is employed to investigate the cointegration relationship between agriculture and non-agricultural sectors in the Chinese economy during 1952–92. Three cointegration vectors are identified among agriculture, industry, construction, transport and services. Agriculture is found to be weakly exogenous to the economic system, suggesting that it was a main driving force for all the other sectors; but the converse is untrue. Government policies biased against agriculture are main reasons for agriculture's weak exogeneity.