An empirical study of the economic connection between Guangdong and Hong Kong

Abstract

This study examines whether there are changes to the inter-influence between the economic positions of Guangdong and Hong Kong. We use the Granger causality test to determine the mutual influence of Guangdong and Hong Kong in their economic positions. Our result indicates that there is a long-term cointegrating and stable economic relationship between Guangdong and Hong Kong. In addition, the result of the ECM Granger causality test suggests that the economies of Guangdong and Hong Kong are substitutes for each other but not complementary. Our analyses of the structural changes before and after 1997 show that the lead economic position between Guangdong and Hong Kong changes before and after 1997.