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The Spillover Effects of the European Government Debt Crisis on Chinese Economy | IEEE Conference Publication | IEEE Xplore

The Spillover Effects of the European Government Debt Crisis on Chinese Economy


Abstract:

This paper establishes an open Dynamic Stochastic General Equilibrium (DSGE) model to study the effects of European government debt crisis on Chinese economy. The model i...Show More

Abstract:

This paper establishes an open Dynamic Stochastic General Equilibrium (DSGE) model to study the effects of European government debt crisis on Chinese economy. The model includes both of the economies, it also contains many real and nominal frictions. Besides, there are comprehensive shocks reflecting fluctuations in demand, supply and policies. We refer to some important literature and key macroeconomic indicators to calibrate the model, then use it to analysis the spillover effects of the current European government debt crisis. The impulse response results show that the spillover effects caused by the rising treasury yields are transmitted mainly by international trade and capital flows between European Area and China. Under the influence of European debt crisis, terms of trade in China gets better but assets price and inflation in China increase modestly.
Date of Conference: 18-21 August 2012
Date Added to IEEE Xplore: 20 September 2012
ISBN Information:
Conference Location: Lanzhou, China

I. Introduction

The debt crisis in European area has caused a serious decline of the European economic and threatened global credit market and large banks. It is most severe in five countries: Portugal, Ireland, Italy, Greece and Spain, which are called “PIIGS”. Excessive debts weakened their ability of debt repayment and further financing, which has caused great harm to the European economy. Until now, recession in European area has occurred, and Europe's debt problems gradually dampen the world economic recovery.

References

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