When the US Sneezes, Will China Catch a Cold?

Jiang, Yanqing; Dai, Yuwen

In this chapter, we examine the synchronization of business cycles between China and the United States for the past few decades. To that end, we measure their business cycles and find the turning points in their cycles. Under a GMM analytical framework, we conduct both single synchronization tests and joint synchronization tests in the growth cycles and acceleration cycles between China and the US. From our synchronization tests, we find strong evidence of positive correlation in the growth cycles between China and the US, with spillover effects on each other. In addition, we find evidence of negative correlation in the acceleration cycles between China and the US across time, which implies that when the rate of US economic growth begins to slow down, the Chinese economy will be resilient. So when the US sneezes, China will not catch a cold.