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    Bank of Finland, Rauhankatu 19 B, Helsinki

Erdenebat Bataa (National University of Mongolia): China's Increasing Global Influence: Changes in International Growth Linkages

Co-authors: Denise R.Osborn (University of Manchester & University of Tasmania) and Marianne Sensier (University of Manchester) entitled

In the light of China's increasing importance in the global economy, we investigate changes in the international linkages for quarterly GDP growth rates since 1975 in a system consisting of the USA, Euro area and China. Utilizing an iterative procedure for detecting structural breaks in the VAR coefficients and covariance matrix, we find dynamics to be unchanged. Most importantly, accounting for volatility change found in 1983 (around the onset of the Great Moderation), 1993 (potentially associated with European integration) and 2007 (just prior to the Great Recession), cross-country correlations are constant before markedly increasing around the time of the Great Recession. In particular, although largely isolated from the other large economies until 2007, growth in China is subsequently strongly related to that of both the US and the Euro area.







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