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

Author/Editor:

Paul Cashin ; Kamiar Mohaddes ; Mehdi Raissi

Publication Date:

March 15, 2016

Electronic Access:

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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.

Series:

Working Paper No. 16/63

Subject:

English

Publication Date:

March 15, 2016

ISBN/ISSN:

9781513590455/1018-5941

Stock No:

WPIEA2016063

Format:

Paper

Pages:

22

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