Analysis of International Trade, Exchange Rate and Crude Oil Price on Economic Development of Yunnan Province: A GARCH-Vine Copula Model Approach

Xinyu Yuan, Songsak Sriboonchitta, Jiechen Tang

Abstract

In this paper, we attempted to use the GARCH-vine copula model toanalyze the dependence structure of international trade, exchange rate, and crudeoil price on the economic development of Yunnan Province. In the C-vine, thedf of the student-t copula model is signicant on C14 and C25j1, and there is theleast degree of freedom in C14, which means that there is a greater probabilityof extreme values in industrial added value and export. In the Clayton copula,we nd a strong signicance with fminunc in C13 and C45j123. With fminuncin C13, the Clayton copula can catch left tail dependence. This means that adecrease in the crude oil spot price is inclined to retard Yunnan's industrial addedvalue growth. In the D-vine, we nd that the df of the student-t copula modelvaries considerably and signicantly in C23 and C34, respectively. Finally, in theClayton copula, we conclude that there exists a strong signicance with fminuncin C45 (export-import) and C13j2.