Cashin, P., Mohaddes, K. and Raissi, M.

China's slowdown and global financial market volatility: Is world growth losing out?

Emerging Markets Review

Vol. 31 pp. 164-175 (2017)

Abstract: China's GDP growth slowdown and a surge in global financial market volatility could both adversely affect an already weak global economic recovery. To quantify the global macroeconomic consequences of these shocks, we employ a GVAR model estimated for 26 countries/regions over the period 1981Q1 to 2013Q1. Our results indicate that (i) a one percent permanent negative GDP shock in China (equivalent to a one-off one percent growth shock) could have significant global macroeconomic repercussions, with world growth reducing by 0.23 percentage points in the short-run; and (ii) a surge in global financial market volatility could translate into a fall in world economic growth of around 0.29 percentage points, but it could also have negative short-run impacts on global equity markets, oil prices and long-term interest rates.

Keywords: China's slowdown, Global financial market volatility, International business cycle,Global VAR

JEL Codes: C32, E32, F44, O53

Author links: Kamiar Mohaddes

Publisher's Link: https://doi.org/10.1016/j.ememar.2017.05.001