Original scientific paper
https://doi.org/10.1080/1331677X.2021.1952088
Uncertainty shocks and monetary policy: evidence from the troika of China’s economy
Chenpei Hu
Zuiyi Shen
Haijing Yu
Bing Xu
Abstract
Growth in China’s economy is driven by the troika: consumption,
investment and export. This paper examines the effect of uncertain events such as the global financial crisis in 2008, and the
COVID-19 pandemic on the troika. Based on the construction of a
new uncertainty index of China’s economy, the relationship
between uncertainty and growth in the troika is examined by
using a TVP-VAR model. Results show that fluctuations in the
uncertainty index during the COVID-19 epidemic had the greatest
negative impact on consumption and investment at a magnitude
of 0.27, notably greater than that during the period of the global financial crisis. The negative impact on export reached 0.73,
smaller than that during the global financial crisis. Against a backdrop of the novel coronavirus epidemic, it is also found that
expansionary monetary policies can have a relatively large impact
on investment and export, reaching 1.75 and 1.57 respectively,
while short-term impact on consumption is relatively weak, averaging at 0.51.
Keywords
The troika; uncertainty index; TVP-VAR model; monetary policy
Hrčak ID:
302030
URI
Publication date:
31.3.2023.
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