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
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: Suggested Citation