International Effects of China's Rise and Transition: Neoclassical and Keynesian Perspectives

CAMA Working Paper 5/2014

49 Pages Posted: 16 Jul 2013 Last revised: 16 Jan 2014

See all articles by Rod Tyers

Rod Tyers

Australian National University (ANU) - School of Economics; The University of Western Australia - Department of Economics

Date Written: January 16, 2014

Abstract

Opinion over the global implications of China‘s rise is divided between critics, who see it as having developed at the expense of both investment and employment in the US, Europe and Japan and proponents who emphasise improvements in the terms of trade and reductions to the cost of financing that stem from China‘s supply of light manufactures, its demand for Western capital and luxury goods and its high saving. The criticism implies Keynesian assumptions while proponents take a neoclassical perspective. In this paper, both are embodied in a global macro model that emphasises bilateral linkages via both trade and investment, with monetary spill-overs represented by globally integrated bond markets. Net gains are suggested for the US and Europe from China‘s successful export-oriented growth, though there are partially offsetting Keynesian effects. China‘s recent slower, more consumption focussed, growth appears also to be beneficial in those regions and in Japan notwithstanding terms of trade losses.

Keywords: China, imbalances, saving, monetary policy, spill-overs

JEL Classification: F42, F43, F47

Suggested Citation

Tyers, Rod, International Effects of China's Rise and Transition: Neoclassical and Keynesian Perspectives (January 16, 2014). CAMA Working Paper 5/2014, Available at SSRN: https://ssrn.com/abstract=2294231 or http://dx.doi.org/10.2139/ssrn.2294231

Rod Tyers (Contact Author)

Australian National University (ANU) - School of Economics ( email )

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The University of Western Australia - Department of Economics ( email )

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HOME PAGE: http://www.business.uwa.edu.au/school/staff-profiles?type=profile&dn=cn%3DRodney%20Tyers%2Cou%3DEcon

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