China’s Financial Spillovers to Emerging Markets

47 Pages Posted: 21 Oct 2024

See all articles by Rodolfo G. Campos

Rodolfo G. Campos

Banco de España

Ana-Simona Manu

European Central Bank (ECB)

Luis Molina

Banco de España

Marta Suárez-Varela

Banco de España

Date Written: October 18, 2024

Abstract

This paper analyzes the financial spillovers of shocks originating in China to emerging markets. Using a high-frequency identification strategy based on sign and narrative restrictions, we find that equity markets react strongly and persistently to Chinese macroeconomic shocks, while monetary policy shocks have limited or no spillovers. The impact is particularly strong in Latin American equity markets, with the likely channel being the effect of shocks in China on international commodity prices. These effects extend to various financial variables, such as sovereign and corporate spreads and exchange rates, suggesting that macroeconomic shocks in China may have implications for economic cycles and financial stability in emerging markets.

Keywords: Emerging markets, Financial spillovers

JEL Classification: F31, F37, F62, F65, G15, N26

Suggested Citation

Campos, Rodolfo G. and Manu, Ana-Simona and Molina, Luis and Suárez-Varela, Marta, China’s Financial Spillovers to Emerging Markets (October 18, 2024). Banco de Espana Working Paper No. 2435, Available at SSRN: https://ssrn.com/abstract=4994133 or http://dx.doi.org/10.2139/ssrn.4994133

Rodolfo G. Campos (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Ana-Simona Manu

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Luis Molina

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Marta Suárez-Varela

Banco de España

Alcala 50
Madrid 28014
Spain

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