Inter-regional Spillovers of Policy Shocks in China

GROENEWOLD N., CHEN A. and LEE G. Inter-regional spillovers of policy shocks in China, Regional Studies. Inter-regional output spillovers from policy shocks are analysed in a three-region vector-autoregressive (VAR)-based model of China using investment as the policy variable. The contemporaneous effect of policy is greater in the coastal region than in the other two regions, and the effect in the central region is larger than in the western region, suggesting that at least part of the expenditure boosts in the poorer inland regions find their way to the coastal provinces. These results are confirmed when the effects of the policy shocks are simulated over time and are found to be generally robust to alternative model specifications.