Exploring the Dynamic Impact between the Industries in China: New Perspective Based on Pattern Causality and Time-Varying Effect

Abstract

Real economy has always been a crucial component of China’s economic development, while fictitious economy has experienced rapid growth in past decades. As a result, the connection between the real and fictitious economy has become increasingly complex. This study utilized a hierarchical framework for classifying real economy and conducted a hidden causality test and EEMD method to explore a causal relationship between markets. Monthly data from July 2001 to September 2022 were analyzed using a TVP-SV-VAR model to investigate dynamic relationships among the manufacturing, construction, real estate, and financial industries as well as the mechanisms between the real and fictitious economies. The study outcomes demonstrated that the financial and real estate industries have only short-term positive effects on the manufacturing and construction industries, and in the later period of sample intervals, both industries had negative effects on the construction industry. The construction industry in the real economy has already shown a trend of moving “from Real to Virtual”, while the core manufacturing industry in the real economy has not yet exhibited this trend. To prevent the spread of this trend in the real economy, it is necessary to guide the fictitious economy to serve the real economy by regulating its development appropriately. This study offers a novel perspective for examining the real economy and the fictitious economy in China.

Research on the Risk Spillover among the Real Economy, Real Estate Market, and Financial System: Evidence from China

“…Should the inherent risks within the real economy converge and erupt, they might trigger risk contagion among independent sectors, leading to significant impacts on the financial system through credit activities and potentially culminating in systemic risks. Recent years have witnessed an expansion in economic scale, drawing scholarly attention to the structure and quality of economic development and revealing significant shifts towards an economy characterized by a growing dominance of the financial and real estate sectors over the real economy [10,11]. This trend reflects a reciprocal diminishing and waxing between these sectors.…”