IMF Working Papers

China's Slowdown and Global Financial Market Volatility: Is World Growth Losing Out?

By Paul Cashin, Kamiar Mohaddes, Mehdi Raissi

March 15, 2016

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Paul Cashin, Kamiar Mohaddes, and Mehdi Raissi. China's Slowdown and Global Financial Market Volatility: Is World Growth Losing Out?, (USA: International Monetary Fund, 2016) accessed October 6, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Econometric analysis, Financial sector policy and analysis, Financial services, Financial soundness indicators, International trade, Long term interest rates, Oil prices, Plurilateral trade, Prices, Vector autoregression

Keywords: China slowdown, China’s slowdown, Commodity price linkage, Financial market volatility, Financial soundness indicators, Global, Global financial market volatility, Global VAR, Growth spillover, GVAR model, International business cycle, Long term interest rates, Oil prices, Plurilateral trade, Slowdown pose, Trade weight, Vector autoregression, Volatility shock, World commodity market, WP

Publication Details

  • Pages:

    22

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2016/063

  • Stock No:

    WPIEA2016063

  • ISBN:

    9781513590455

  • ISSN:

    1018-5941