Research Paper Proceedings of ICES 2015 International Conference : Asian Economy at the Crossroad : China, India, and ASEAN

Xu, Peng  ,  Esho, Hideki

196pp.1 - 327 , 2015-12-11 , Institute of Comparative Economic Studies, Hosei University
There are conflicting views on the impact of political conflict on economic relations from the literature of international political economics. We use quarterly data to investigate the effects of political relation on export flows between China and certain countries in East Asia from 1980 to 2013 while controlling the role of the economic power of China. The results suggest that the political relations between China and East Asia countries impact their trade volume significantly which supports the traditional view of "trade following flag". We also find that China’s economic power decreases the impact of political relations on the bilateral trades. However, the interaction among political relations, trade flows, and China economic power varies for the periods before and after the 2008 financial crisis.

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