Do permanent shocks explain income levels? A common cycle-common trend analysis of regional income levels for china

Paresh Kumar Narayan, Seema Narayan

Research output: Contribution to journalArticleResearchpeer-review

2 Citations (Scopus)


In this paper, we analyse per capita income levels of China's three main regions: the western region, the eastern region and the central region using common cycle and common trend tests. Our main contribution is that we impose the common cycle and common trend restrictions in decomposing shocks into permanent and transitory components. We find that: (i) there is evidence for two cointegrating relationships and one common cycle; and (ii) the variance decomposition analysis of shocks provides evidence that over short horizons, permanent shocks play a large role in explaining variations in regional per capita incomes.

Original languageEnglish
Pages (from-to)656-662
Number of pages7
JournalPacific Economic Review
Issue number5
Publication statusPublished - Dec 2008
Externally publishedYes

Cite this