When China Sneezes Does ASEAN Catch a Cold?

November 10, 2016

Preview Citation

Format: Chicago

Sohrab Rafiq. When China Sneezes Does ASEAN Catch a Cold?, (USA: International Monetary Fund, 2016) accessed September 23, 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

This paper looks at the effects of a China slowdown on Emerging Market Economies (Indonesia, Malaysia, and Thailand) and Frontier Developing Economies (Cambodia, Lao P.D.R., and Vietnam) in ASEAN. The main finding is that the impact of China growth shocks on ASEAN has risen since the global financial crisis. A one percent decline in China’s growth implies a 0.3 percent reduction in growth for ASEAN EMEs and 0.2 for FDEs. An important component of inflation is also shared between ASEAN and China. These magnitudes are double what they were two decades ago due to stronger trade and financial linkages. Finally, a slowdown in China, while having real effects, also has a financial impact via slower credit growth and lower equity prices. This is in line with the existence of both portfolio balance and signaling channels, in which ASEAN market participants absorb news on China economic activity as an indicator over domestic growth prospects.

Subject: Asset prices, Business cycles, Economic growth, Economic recession, Financial cycles, Financial sector policy and analysis, Inflation, Prices

Keywords: ASEAN, ASEAN inflation cycle, ASEAN inflation volatility, Asset prices, Business cycles, China, China growth slowdown, Does ASEAN, Economic activity, Economic recession, Financial, Financial cycles, Global, Growth shock, Inflation, Spillovers, Time-varying, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/214
Stock No:

WPIEA2016214
ISBN:

9781475552607
ISSN:

1018-5941

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