The Impact of China’s Slowdown on the Asia Pacific Region

Inoue, Tomoo; Kaya, Demet; Ohshige, Hitoshi

The Impact of China’s Slowdown on the Asia Pacific Region

Autores

Inoue, Tomoo

Kaya, Demet

Ohshige, Hitoshi

Editor

World Bank, Washington, DC

Descripción

An export-oriented development strategy fostered the Asia Paciﬁc region’s economic success, making it the fastest growing region in the world. In recent years, despite waning demand from the crisis-hit Western economies, the accelerating demand from China boosted intraregional trade in Asia. Although China’s Asian trading partners beneﬁt from increasing exports to China, this stronger linkage with China has made them more vulnerable to the risk of a Chinese slowdown. This paper examines the impact of a negative Chinese gross domestic product (GDP) shock on Asian economies by employing the Global Vector Autoregressive (GVAR) model, using the dataset through the third quarter of 2014 for 33 countries. The analysis finds that a negative Chinese GDP shock impacts commodity exporters, such as Indonesia, to the greatest extent, reﬂecting both demand and terms of trade shocks. Export-dependent countries in the East Asian production cycle, such as Japan, Malaysia, Singapore and Thailand, are also severely aﬀected. The analysis also finds that a negative shock to China’s real GDP would not only have an adverse eﬀect on the price of crude oil, as some previous studies have also shown, but also on the prices of metals and agricultural products. The study also investigates the impact of a potential negative shock to the real GDP of the United States on Asian countries, and determines that although the U.S. economy has a larger inﬂuence on Asian economies than China’s economy, the Asian countries are more exposed to China than ever through increased economic ties.

Palabras clave

FORECASTS, GROWTH RATES, REAL ECONOMIC ACTIVITY, MONETARY POLICY, TRADE SHARE, OIL PRICE, ECONOMIC GROWTH, WORLD TRADE ORGANIZATION, PRICE INCREASES, SHORT-TERM RATE, LAGS, T-VALUE, TRADE SHARES, SHORT-TERM INTEREST RATES, DIRECTION OF TRADE, STRUCTURAL CHANGE, INTEREST, DEPRECIATION, DUMMY VARIABLES, EXPECTATIONS, INTEREST RATE, REAL GDP, EXCHANGE, EQUITY MARKET, DEVELOPING COUNTRIES, EXPORTS, ELASTICITY, SHARE OF WORLD TRADE, RECESSION, POLITICAL ECONOMY, EXPORTERS, PRICE INDICES, INTERNATIONAL BUSINESS, TRANSMISSION MECHANISM, DISTRIBUTION, VARIABLES, INTERNATIONAL ECONOMIES, SLOWDOWN, EQUITY PRICES, PRICE, GOVERNMENT BOND, DUMMY VARIABLE, SUPPLY CONDITIONS, INFLATION, ECONOMIC SHOCK, VARIANCE-COVARIANCE MATRIX, IMBALANCE, PUBLIC POLICY, OIL PRICES, ECONOMIC SLOWDOWN, GLOBAL ECONOMY, CURRENCY, TRADE SHOCKS, ERROR CORRECTION MODEL, COVARIANCE MATRIX, REGIME CHANGES, TRADE INTEGRATION, ADVANCED ECONOMIES, RESERVE BANK, EXOGENOUS VARIABLES, MONEY, GOLD, BASE YEAR, ECONOMETRICS, INTEREST RATES, SUPPLY SHOCKS, WTO, OPEN ECONOMY, BUSINESS CYCLE, IMPORTS, DIRECT INVESTMENT, GROSS DOMESTIC PRODUCT, REAL ESTATE, COMMODITY PRICE, MACROECONOMIC FORECASTING, BANKING SECTOR, IMPACT ON PRICES, EQUITY, FEDERAL RESERVE, OIL MARKET, EQUITY PRICE, FEDERAL RESERVE BANK, INTERNATIONAL TRADE, LONG-TERM INTEREST RATE, FINANCIAL CRISIS, FUTURE, VALUE, FOREIGN DIRECT INVESTMENT, INTERNATIONAL MONEY, PRICE OF OIL, CREDIT, MACROECONOMICS, WORLD ECONOMY, DEVELOPMENT STRATEGY, DEMAND, LONG-TERM INTEREST RATES, ECONOMY, AGRICULTURE, EQUATIONS, ERROR TERM, MEASUREMENT, SHARES, REAL EXCHANGE RATE, RAPID EXPANSION, FINANCIAL ANALYSIS, DYNAMIC ANALYSIS, ECONOMIC THEORY, LOCAL CURRENCY, MONETARY POLICIES, ENDOGENOUS VARIABLES, OUTPUT, MACROECONOMIC VARIABLES, BUSINESS CYCLES, TRADE DATA, WEIGHT, ECONOMIC DEVELOPMENT, TRADE, ECONOMIC INTEGRATION, ERROR CORRECTION MODELS, GDP, GOODS, THEORY, GROWTH RATE, INVESTMENT, RISK, BOND, SHARE, SHORT-TERM INTEREST RATE, CREDIT QUALITY, AUTOREGRESSION, INTERNATIONAL PRICES, SUPPLY, BANKING, TRADE RELATIONS, EXTERNAL SHOCKS, COMMODITY MARKETS, DEVELOPMENT FINANCE, CONSUMER PRICE INDEX, WORLD TRADE, COMMODITY MARKET, RAPID GROWTH, COMMODITIES, EXCHANGE RATE, PRICE INDEX, COMMODITY PRICES, TRADING PARTNERS, TRADING PARTNER, OPEN ECONOMIES, COMMODITY, WEIGHTS, WORLD MARKET, PRICES, ECONOMIES, TRADE STATISTICS, DEVELOPMENT POLICY, FUTURE RESEARCH