Political Relations and Trade: New Evidence from Australia, China and the United States

Forthcoming, Scottish Journal of Political Economy, Open Access, https://doi.org/10.1111/sjpe.12367

49 Pages Posted: 14 Jun 2022 Last revised: 9 Nov 2023

See all articles by Yifei Cai

Yifei Cai

The University of Western Australia

Jamel Saadaoui

University of Strasbourg

Yanrui Wu

University of Western Australia

Date Written: May 30, 2022

Abstract

This paper employs structural vector autoregression and local projection methods to examine the impacts of the deterioration in US-China political relations on Australia-China bilateral trade. By imposing a recursive identification scheme with different assumptions, the empirical results illustrate that worsening US-China political relations have a negative impact on Australian exports to and imports from China. Under a time-varying structural vector autoregression model, it is found that the deterioration in US-China political relations augments the negative impacts on Australia-China bilateral trade during the Trump's administration. The empirical findings provide insightful policy suggestions to both Australian and Chinese governments.

Keywords: Structural vector autoregression, local projection, impulse response; US-China political relation; Australia-China trade

JEL Classification: C32, F14, F51

Suggested Citation

Cai, Yifei and Saadaoui, Jamel and Wu, Yanrui, Political Relations and Trade: New Evidence from Australia, China and the United States (May 30, 2022). Forthcoming, Scottish Journal of Political Economy, Open Access, https://doi.org/10.1111/sjpe.12367, Available at SSRN: https://ssrn.com/abstract=4124255 or http://dx.doi.org/10.2139/ssrn.4124255

Yifei Cai

The University of Western Australia ( email )

Jamel Saadaoui (Contact Author)

University of Strasbourg ( email )

61 Avenue de la Forêt Noire
Strasbourg, Alsace 67000
France

HOME PAGE: http://www.jamelsaadaoui.com/

Yanrui Wu

University of Western Australia ( email )

Department of Economics
Nedlands WA 6907
Australia
+61 8 9380 3964 (Phone)
+61 8 9380 1016 (Fax)

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