China's Slowdown and Global Financial Market Volatility: Is World Growth Losing Out?

21 Pages Posted: 8 Sep 2016

See all articles by Paul Anthony Cashin

Paul Anthony Cashin

International Monetary Fund (IMF)

Kamiar Mohaddes

University of Cambridge - Judge Business School; University of Cambridge - King's College, Cambridge

Mehdi Raissi

International Monetary Fund (IMF) - Fiscal Affairs Department

Multiple version iconThere are 2 versions of this paper

Date Written: February 25, 2016

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.

Keywords: China’s slowdown, global financial market volatility, international business cycle, and Global VAR

JEL Classification: C32, E32, F44, O53

Suggested Citation

Cashin, Paul Anthony and Mohaddes, Kamiar and Raissi, Mehdi, China's Slowdown and Global Financial Market Volatility: Is World Growth Losing Out? (February 25, 2016). CAMA Working Paper No. 57/2016 , Available at SSRN: https://ssrn.com/abstract=2835234 or http://dx.doi.org/10.2139/ssrn.2835234

Paul Anthony Cashin

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Kamiar Mohaddes (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 (0)1223 766933 (Phone)

HOME PAGE: http://https://www.mohaddes.org/

University of Cambridge - King's College, Cambridge ( email )

King's Parade
Cambridge, CB2 1ST
United Kingdom
+44 (0)1223 766933 (Phone)

HOME PAGE: http://https://www.mohaddes.org/

Mehdi Raissi

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

HOME PAGE: http://https://sites.google.com/site/mehdiraissi/

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