Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7347161 | Economic Modelling | 2018 | 12 Pages |
Abstract
Free trade can generate macroeconomic gains but also vulnerability to external shocks for a highly-specialized economy. To test this hypothesis, we evaluate the effects of Mainland-Macau Closer Economic Partnership Arrangement (CEPA) on Macau's real GDP growth rate and its volatility, as well as the costs of exposure to the anti-corruption campaign from mainland China using a counterfactual analysis. Counterfactuals of Macau are constructed by exploiting the inter-dependence among different economic entities and the optimal control group is selected with a leave-nv-out cross-validation method. Our results support the hypothesis. CEPA raised the annual real GDP growth rate of Macau by 20.76% from 2004 to 2007, meanwhile it increased the volatility of real GDP growth rate by 35%, and the anti-corruption campaign reduced the annual real GDP growth rate by 17.54% from 2013 to 2016. Our findings imply that free trade could be a double-edged sword for a small and highly-specialized economy and the gains of free trade can be enlarged by reducing its vulnerability.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Hua Yin, Zaichao Du, Lin Zhang,