History Matters in International Relations: Evidence from Long-Memory Processes in Sino-American Cycles
30 Pages Posted: 18 Oct 2019
Date Written: July 2019
Measures of bilateral political relations are typically long-memory (fractionally integrated) processes. Appropriate inference and interpretation of this property hinges on the underlying reasons behind it. There are three possible explanations: (i) mechanical aggregation, (ii) bilateral relations history, and (iii) structural breaks. Explanations (i) and (iii) are data-induced, and thus not particularly meaningful. Explanation (ii) indicates that long-memory is a genuine feature in the series’ dynamics. Using Sino-American relations as a case study, we conduct three tests to identify the underlying cause. We first examine the stability of the long-memory parameter over the sample period (1980-2018), and discard structural breaks. Next, we evaluate the long- memory parameter for U.S.-China political relations, and for seven issues in the bilateral political relations portfolio. Finally, we investigate whether bilateral political relations and each of the issues are fractionally cointegrated. Our results suggest that the bilateral relations history is pivotal for explaining the observed fractional integration.
Keywords: Sino-American relations, fractional integration, spectral regressions, long-memory processes
JEL Classification: F50, C32
Suggested Citation: Suggested Citation