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When China Sneezes Does ASEAN Catch a Cold?
Author:
Mr. Sohrab Rafiq
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Series:
IMF Working Papers
Volume/Issue:
Volume 2016: Issue 214
Language:
English
Publication Date:
10 Nov 2016
DOI:
https://doi.org/10.5089/9781475552607.001
ISBN:
9781475552607
ISSN:
1018-5941
Pages:
22
Keywords:
WP; economic activity; China; spillovers; financial; ASEAN; time-varying; ASEAN inflation volatility; growth shock; does ASEAN; China growth slowdown; ASEAN inflation cycle; Economic recession; Financial cycles; Inflation; Business cycles; Asset prices; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2016: Issue 214