International Finance Discussion Papers (IFDP)
October 2019
Global Spillovers of a China Hard Landing
Shaghil Ahmed, Ricardo Correa, Daniel A. Dias, Nils Gornemann, Jasper Hoek, Anil Jain, Edith Liu, and Anna Wong
Abstract:
This paper analyzes the potential spillovers of acute financial stress in China, accompanied by a sharp slowdown in Chinese growth, to the rest of the world. We use three methodologies: a structural VAR, an event study, and a DSGE model. We find that severe financial stress in China would have consequential spillovers to the United States and the global economy through both real trade links and financial channels. Other EMEs, particularly commodity exporters, would be hit the hardest. The U.S. economy would be affected to a lesser degree than both EMEs and other advanced economies, and the primary channel of transmission to the U.S. could well be adverse financial spillovers through increased global risk aversion and negative equity market spillovers
Accessible materials (.zip)
Note: On October 22, 2019, a corrected version of this paper was posted because the version published on October 18, 2019, was a draft version that was published in error.
Keywords: China, financial crisis, spillovers, financial system
DOI: https://doi.org/10.17016/IFDP.2019.1260
PDF: Full Paper