Effects on ICT Shocks of Macroeconomy and Manufacturing Industries: Focusing on Guangdong Province in China
Authors:   Asia-Europe Perspective Association, Chen Bin , Shi Junguo , Lee Ki Seong 
Published: April 2019

The analysis on the returns and volatility of ICT (Information & Communication Technology) productivity in industrial organization is one of the important research fields in economics, and the issue such as the influence of ICT productivity on macroeconomic variables has been examined over time. Since the fluctuation of a country’s macroeconomy has always closely associated with the changes of ICT industrial production, ICT industry can be used for a variety of purposes, such as improving intermediate goods, capital goods or business processes. It is highly possible that the variation of ICT productivity exert significant influences on macroeconomic variables and many literatures consider this relationship. However, the study on the Chinese industrial economy has it own especially important meanings. Firstly, due to the relatively short of the establishment period of Chinese open economic system, Guangdong’s ICT industry in China for the first special economic zone developed rapidly as a result of foreign investment. ICT industry also takes up comparatively large proportions in the entire Guangdong manufacturing sector. These features cause the instability of Chinese macroeconomic variables. Therefore, a different characteristics might be found on the relationship between macroeconomic variables and stock prices in China. Secondly, the interference of Chinese government (or province government) on the economic development is relatively severe, compared with developed capitalist countries, and industry development is also often intervened under national regulations and controls. Thus, the relationship between the volatility of macroeconomic variables and ICT industry development may present different features from those developed countries. Thirdly, unlike export-oriented emerging stock market such as Korea, Chinese Guangdong might be more affected by its national economic policies, foreign markets and the change of macroeconomic variables. It is hard to determine how can ICT industry will affect the fluctuation of the variation of macroeconomy in Guangdong based on theoretical works. The empirical analysis should be conducted to judge the relationship between them. In addition, due to the existence of the fact that the proportion of ICT industrial production is higher than other manufacturing sectors in Guangdong, the comparisons also should be analyzed to investigate how other industries react differently to the change of ICT industry.
This paper tries to analyze the spillover effect of the ICT industry volatility between macroeconomic variables and other industries in China’s Guangdong. In this paper, we investigate the effect of Guangdong ICT industrial production shock on Macroeconomic variables (total industrial production, import export) and other industrial production that can represent macroeconomic variables used by structural VAR (structural vector autoregressive) model. We also analyze the importance of macroeconomic shocks on the volatility of each economic variable using the structural variance decomposition. The analysis tries to figure out whether the effects of ICT in the main industries have the different return and volatility spillover effect or not.
This paper’s data used a monthly dataset of Chinese Guangdong’s ICT industry covering the period from January 1998 to December 2014. The structural VAR model were used to consider the short-run structural shocks in the model among variables. The results show that ICT output shock has positive effects on the national income as well as on the productions in most of manufacturing industries. As a result of structural variance decomposition analysis, ICT production shock was statistically significant not only in industries closely related to ICT, but also in production variability of traditional industry.