After the statistical test and GVAR model estimation were completed, the dynamic interaction and two-way spillover effects of economic growth and energy consumption between the US and developed or developing countries were analyzed with the help of the generalized function of the impulse response, which can measure the impact of a standard deviation of the random error term and can give rise to the present and future values of other variables, as well as intuitively reflect the dynamic reciprocal action between the variables in the model and the individual spillover effect.
Impulse responses refer to the time profile of the effects of shocks of the specific variables or identified shocks on the future states of a dynamical system and on all the variables in the model. The impulse responses of shocks to specific variables considered for the GVAR model are the generalized impulse response functions (GIRFs), introduced in Koop, Pesaran and Potter [
59] (1996), and adapted to VAR models in Pesaran and Shin [
60] (1998). Compared with the standard impulse response analysis of traditional VAR literature, GIRF integrates the impact of shock waves into a single variable based on the observed residual covariance matrix, with no need for orthogonal process. This is an ideal function for the GVAR setting. The fact that the error term is not orthogonalized means that GIRFs may be related to each other, causing problems in structural interpretation. Evidence from
Table A6 that the residual correlation is weak shows that each GIRF is not greatly influenced by other shocks in this system.
When conducting GIRF analysis, we aggregated 26 EU countries based on data for constructing the aggregation weights above. The remaining countries are analyzed as separate economies. The horizontal axis in the image represents the number of periods during which the fluctuations continue, and we have selected 40 quarters. The vertical axis represents the fluctuation caused by the unit shock. The solid line indicates the response function curve, and the dashed line represents the confident interval of 90% under Bootstrap simulation, which is calculated based on 100 repetitions of GIRF. We will select the European Union, Japan, South Korea, Australia, Canada and the United Kingdom as representatives of advanced economies, and China, Brazil, Indonesia, India, Mexico and Turkey as representatives of emerging economies.
3.1. The Spillover Effect of the Negative Shock of US Economic Growth
Figure 1 shows the dynamic response process of economic growth in representative developed economies under the negative economic shock from the United States. In general, we can see from the figure that the dynamic response of the GDP of these developed countries is negative, and the degree of response changes over time. It fluctuates in the short-term (within five years) and will stabilize to a certain extent in the long-term (within five years). The following is a detailed description. Among these representative developed economies, Canada, Japan and the United Kingdom have the closest trade ties with the United States. The European Union, South Korea and Australia followed. Under the shock of a negative standard deviation of US economic growth, the dynamic response process of economic growth in developed countries shows a negative U-shaped characteristic. In the first twelve periods, the GDP curves of all countries showed a downward trend, but it was not significant. In terms of response speed, the response speeds of these countries are roughly the same. However, in terms of response level, among these countries, Japan had the largest decline. By the 12th period, Japan had the largest negative response value of −0.54%, while Australia had the smallest decline, and the minimum is −0.1%. This again confirms the fact that, among these countries, Japan and the United States have the closest trade ties, and Australia and the United States have the smallest trade ties. After the 12th period, the GDP curves of various countries began to show an upward trend, but the increase was significantly smaller than the decrease. Eventually, it converges to a fixed negative value around the 24th period, and this feature is significant in all countries. Among them, Japan has the largest long-term negative response value, which fluctuates around −0.4%, while the response value of other countries is about half of it, and the response value of other countries is between −0.1% and −0.2%. Judging from the results of the GIRF chart, it is undeniable that the US economic shock has brought a negative spillover effect to the economic growth of developed nations, indicating that the US economic downturn caused by the pandemic will inevitably bring pressure to developed countries’ economic development. In the short run, the economic growth of these countries has been impacted to varying degrees. Among them, Japan is the most impacted, followed by the United Kingdom and the European Union, and Australia has endured the least impact. In the long run, the economic downturn in the United States has reduced the economic growth of representative developed countries.
Figure 2 demonstrates the dynamic response process of economic growth of representative developing countries under the negative influence of one standard deviation of US economic growth. Generally, it can be seen from the graph that the dynamic response of GDP of these developing countries is negative, and the response degree changes with time. It fluctuates in the short run (within five years) and will approach zero in the long run (within five years). The following is a detailed description. Among these representative developing countries, China and Mexico have the closest trade relations with the United States. Followed by India and Brazil and, finally, Indonesia and Turkey. Under the negative shock of the US economy, the performance of developing countries varies. It can be roughly divided into two situations. One is composed of China, Mexico and India, and the other is composed of Brazil, Indonesia and Turkey. On the one hand, the GIRF curves of China, Mexico, and India fluctuate significantly and show similar trends. The immediate response values of these three countries in the 0th period (which is the first quarter after the shock) were all negative and, in the first eight periods, the degree of negative response continued to deepen and fell after the eighth period (which is the fourth quarter of the second year after the shock). In general, in the short term, the spillover effect of the negative economic shock in the United States on the economic growth of these three countries is very significant, although the degree of response of these countries to the shock is different in value. After the twelfth period (that is, the fourth quarter of the third year after the shock), the GIRF curves of these three countries have all approached zero and stabilized. This shows that the economic growth of China, Mexico and India will be negatively influenced by the US economic shock in the short term, and the impact will be very rapid. However, after about two years, this effect gradually disappears. That is to say that the spillover effect of the US economic shock on the economic growth of China, Mexico and India was short-term and significant. In the long run, the impact of this economic shock will fade, but it is not significant. On the other hand, regardless of the bilateral trade volume in statistics or the direction of foreign trade, Brazil, Indonesia and Turkey do not have close trade with the United States. The GIRF graphs of these countries are roughly similar, showing a negative dynamic response process; the response value gradually increases in the previous period and then stabilizes at a fixed value but, unfortunately, this result is not significant.
Whether it is from the analysis of developed countries or from the analysis of developing countries, there is no doubt that the pandemic not only caused losses to the US economy but that this shock will also spread to other countries around the world, along with trade ties. The first to bear the brunt is the trading partner countries with the closest trade ties with the United States, such as Japan, China and Mexico, and the impact of this kind of shock on developed countries is far more profound than on developing countries. Under the shock of the US economy, the dynamic response process of the economic growth of countries such as Australia, Indonesia and Turkey, which are not close to the US trade ties, is also negative, but not significant. A possible reason for this difference is the heterogeneity of trade associations.
Figure 3 shows the spillover of the US economic shock on the energy consumption of representative developed economies. In general, the negative economic shock in the United States reduced energy consumption in developed countries. With the exception of Canada and Australia, the GIRF charts of the other developed economies show similar trends, and the response process is always negative. In the 0th period, the immediate response values were all close to 0, but then the curve showed a downward trend. Around the 12th period (around the third year after the shock), the response level stabilized near a certain fixed value, and then stabilized; this performance in the later period was highly significant. When the response value of each country reaches the maximum, it can be concluded, by comparison, that the peak value of Korea is the smallest among these countries, which is about half of other countries. In the long term (within ten years), the response values of Japan, the United Kingdom and the European Union will be maintained at around −0.9%, while South Korea and Australia will be around −0.2% and −0.1%, respectively. The response speed of countries is roughly the same. This shows that the economic shock caused by the pandemic in the United States will gradually reduce the consumption of energy in these countries. In the long run, however, this spillover effect is obvious. That said, the degree of influence on different countries is different; similar to the response to economic growth, Japan’s influence is deeper.
Figure 4 presents the spillover of the US economic shock on the energy consumption of representative developing economies. On the whole, it can be roughly divided into two situations, one is composed of Mexico, India and Indonesia, and the other is composed of China, Brazil and Turkey. The GIRF curve trends of China, Brazil and Turkey are roughly the same, and they all fluctuate below the horizontal axis. At first, the immediate response values in the 0th period were all less than 0. In the following four quarters (within the first year after the shock), the curve began to decline. When the curve in China fell to about −0.15%, the decline stopped, and the corresponding value in the other two countries was −0.5%. Judging from the negative performance in the early stage of the curve, China’s performance is the most significant, while the performance of the other two countries is not significant. After the fourth quarter, the response levels of these three countries were relatively stable, and the response values gradually tended to zero. This shows that the negative economic shock of the United States can gradually reduce the energy consumption of China in the short run, and the spillover effect of this economic shock is gradually deepening. However, in the long run, this effect will disappear over time. What differs from the response process of these countries is the performance of Mexico, India and Indonesia. Their GIRF curves are all located above the horizontal axis, and their immediate response values in period 0 are all 0. In the first four quarters (within the first year after the shock), Mexico and India’s response levels will be very weak, and the response values will be significantly close to zero. In the later period, the curves of these two countries also remained on the positive side, but this positive response is not very significant in the long run (within ten years). This reflects the fact that the negative shock of the US economy will not affect the energy consumption of Mexico and India, and the spillover effects caused by the US economic downturn will not affect the energy consumption of these two countries.
Whether from the perspective of developed or developing countries, in general, the spillover effect of the negative shock of the US economy on other countries’ energy consumption is to reduce the energy consumption of these nations to varying degrees. Countries with the closest trade ties to the United States, such as Japan and China, have suffered the most from this impact. However, the difference is that the impact of the US economic shock on developing countries’ energy consumption is significant in the short term, while the impact on developed countries is significant in the long term (within ten years).
3.2. The Spillover Effect of the Negative Shock of US Energy Consumption
Figure 5 and
Figure 6 show the spillover of the negative shock of US energy consumption on the economic growth of other nations.
Figure 5 shows the situation of representative developed countries, and
Figure 6 shows the situation of representative developing countries.
Under the shock of a negative standard deviation of energy consumption in the US, the dynamic response process of economic growth in both developed and developing nations showed negative characteristics. In the first twelve periods (within the first three years after the shock), the GDP curves of countries fluctuated slightly below the horizontal axis, and the fluctuations were very small. In terms of response speed, the response speeds of these countries are roughly the same. Excluding Canada and South Korea, the immediate response values of developed countries are all close to 0, and the absolute value of immediate response values of developing countries is slightly larger than that of developed countries. In the first eight quarters, the GIRF chart showed a slight downward trend. After the 12th period (the third year after the shock), the curves all showed a stable trend, but the performance was not significant. The GIRF curves of Japan, Canada, the United Kingdom and the European Union have stabilized near the horizontal axis, but the long-term response values of developing nations such as Brazil, China and India are larger than those of the developed countries mentioned above. This shows that the shock of the pandemic on energy consumption in the United States has spillover effects. Specifically, the negative shock of energy consumption has spread to other countries along the international trade chain, and has a negative effect on other nations, namely the reduction in energy consumption of the United States will slightly reduce the economic growth of other countries.
Figure 7 and
Figure 8 show the spillover of the negative shock of US energy consumption on that in other countries.
Figure 7 shows the spillover situation of representative developed economies.
Figure 8 shows the spillover situation in representative developing countries.
According to
Figure 7, in the case of the energy consumption shock from the US, the energy consumption of other developed countries has shown a negative response characteristic. The GIRF curves are all located below the horizontal axis. The immediate response values of Canada and South Korea are between −0.1% and −0.2%, and this performance is significant. The immediate response values of Japan, the United Kingdom, the European Union and Australia are all around 0, but they are not significant from the results. In the following twelve periods, the GIRF curves of these developed countries all showed a slight downward trend. After the twelfth period (the third year after the shock), the GIRF curves fluctuated around a fixed value, and the deviation from this fixed value was small. Among them, Japan has the largest negative response, and the absolute value of the response is about twice that of other countries. This indicates that the reduction in energy consumption of the US has not had a significant negative influence on energy consumption in other developed countries. This spillover effect is not very significant.
According to
Figure 8, in the case of the energy consumption shock from the United States, the energy consumption of most developing countries showed negative response characteristics, but Mexico and India showed positive response characteristics. In terms of immediate response values, the response values of China, Brazil, Indonesia, and Turkey are all negative, all around −0.2%, but China has the greatest degree of negative response. The immediate response values of Mexico and Turkey are both close to zero. In the first four quarters (within the first year after the shock), this performance was remarkable. In the long run, the response level of each country remains at a relatively stable level. However, long-term performance is not significant, which indicates that the reduction in energy consumption in the US spilled over to these developing countries in the short term, and the influence was a slight reduction in energy consumption of countries such as China and Brazil. The energy consumption of Mexico and India will not be affected by the energy consumption of the United States.