Macroeconomic spillover effects of the Chinese economy.

Abstract

The slowdown of economy and widening of domestic imbalances in China bothers economists and politicians across the globe. We estimate the influence of a negative output shock in China on a number of different economies. We concentrate on China's neighboring countries. We compare the results from the Global VAR model and from the Bayesian VAR models. Also using Bayesian model averaging we search for determinants of Chinese spillovers for the global economy. We find that spillovers are stronger to economies with less flexible exchange rates, a higher share of manufacturing in gross value added and to economies which are larger.