China Spillovers: Aggregate and Firm-Level Evidence

We estimate the impact of distinct types of slowdowns in China on countries and firms globally. First, we combine a structural vector autoregression framework with a broad-based measure of domestic economic activity in China to distinguish supply versus demand components of Chinese growth. We then u...

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Bibliographic Details
Published in:Policy File 2023
Main Authors: Copestake, Alexander, Firat, Melih, Furceri, Davide, Redl, Chris
Format: Report
Language:English
Subjects:
Economic conditions
Economic growth
Economic slowdowns
Supply & demand
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Summary:We estimate the impact of distinct types of slowdowns in China on countries and firms globally. First, we combine a structural vector autoregression framework with a broad-based measure of domestic economic activity in China to distinguish supply versus demand components of Chinese growth. We then use local projection models to assess the responses to such shocks of GDP growth (revenue) in other countries (firms). We find that: (i) both supply and demand slowdowns are associated with substantial declines in partner GDP and firm revenue; (ii) negative spillovers are larger in countries and firms with stronger trade links with China; and (iii) spillovers from Chinese supply shocks are stronger than spillovers from demand shocks, both at the aggregate- and firm-level.