When China Sneezes Does ASEAN Catch a Cold?
IMF Working Papers, November 10, 2016
Source details
- Canonical URL
- When China Sneezes Does ASEAN Catch a Cold?
Other formats
Bibliographic details
- Authors: Sohrab Rafiq
- Published: November 10, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475552607.001
Overview
- Paper examines 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.
- Main conclusion: the impact of China growth shocks on ASEAN has risen since the global financial crisis.
Quantitative findings
- A one percent decline in China’s growth implies:
- a 0.3 percent reduction in growth for ASEAN EMEs.
- a 0.2 percent reduction in growth for ASEAN FDEs.
- These magnitudes are double what they were two decades ago due to stronger trade and financial linkages.
- An important component of inflation is shared between ASEAN and China.
Transmission channels and financial effects
- Real-economy channel: China slowdown translates into lower growth in ASEAN economies (EMEs and FDEs as quantified above).
- Financial channel: China slowdown is associated with slower credit growth and lower equity prices in ASEAN.
- Mechanisms consistent with observed effects:
- Portfolio balance channel.
- Signaling channel, where ASEAN market participants absorb news on China economic activity as an indicator over domestic growth prospects.
Time variation and linkages
- The strength of China→ASEAN spillovers has increased since the global financial crisis.
- Stronger trade and financial linkages relative to two decades ago explain the roughly twofold increase in the magnitudes of spillovers.
Subject coverage and keywords (as labeled in the paper)
- Subjects: 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.
When China Sneezes Does ASEAN Catch a Cold? By Sohrab Rafiq, November 10, 2016.
Content in this bundle
- When China Sneezes Does ASEAN Catch a Cold?