Working Paper

China’s slowdown and global financial market volatility: is world growth losing out?

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.

JEL Classification: C32; E32; F44; O53;

https://doi.org/10.24149/gwp270

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Globalization Institute Working Papers

Publication Date: 2016-03-17

Number: 270