Hong Kong’s Growth Synchronization with China and the U.S.: A Trend and Cycle Analysis
IMF Working Papers, April 28, 2015
Source details
- Canonical URL
- Hong Kong’s Growth Synchronization with China and the U.S.: A Trend and Cycle Analysis
Other formats
Bibliographic details
- Authors: Dong He, Wei Liao, Tommy Wu
- Published: April 28, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484336106.001
Overview
- Authors: Dong He, Wei Liao, Tommy Wu
- Date: April 28, 2015
- Purpose: Investigates the synchronization of Hong Kong SAR’s economic growth with mainland China and the United States, focusing on trend and cyclical components of income and how shocks from China and the U.S. affect Hong Kong over time.
- Core hypothesis tested: Whether real consumption in Hong Kong SAR and mainland China satisfy the permanent income hypothesis, at least in a weak form.
Methodology
- Trend identification: Uses the permanent income hypothesis to identify trends of economic growth.
- Decomposition: Identifies permanent and transitory components of income of each economy using a simple state-space model.
- Transmission analysis: Employs structural vector autoregression (SVAR) models to analyze how permanent and transitory shocks originating from mainland China and the United States affect the Hong Kong economy and how those influences evolve over time.
Major findings
- Transitory shocks from the United States remain a major driving force behind Hong Kong SAR’s business cycle fluctuations.
- Permanent shocks from mainland China have a larger impact on Hong Kong SAR’s trend growth.
- Real consumption in Hong Kong SAR and mainland China are confirmed to satisfy the permanent income hypothesis, at least in a weak form (as tested in the paper).
Subjects and keywords
- Subjects: Balance of payments, Business cycles, Consumption, Economic growth, Foreign direct investment, Income, International trade, National accounts, Service exports
- Keywords: business cycle, Business cycle synchronization, Business cycles, Consumption, consumption data, consumption in Hong Kong, Foreign direct investment, Global, Hong Kong block, Hong Kong economy, Hong Kong SAR financial market, Hong Kong's transformation, Income, income hypothesis, outward FDI position, permanent income hypothesis, productivity of the Hong Kong SAR economy, SAR financial services, Service exports, shares in Hong Kong SAR financial services, stochastic trend, structural vector autoregression, WP