The Political Relation and Trade – The Case of US, China and Australia

NEW WORKING PAPER: 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.

You are welcome to download, share or comment the following working paper:

Yifei Cai, Jamel Saadaoui, Yanrui Wu, The Political Relation and Trade – The Case of US, China and Australia (May 30, 2022). BETA Working Paper 2022-22, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4124255

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