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Impact of China’s slowdown on the Global Economy: Modified GVAR Approach

Dinda, Soumyananda (2015): Impact of China’s slowdown on the Global Economy: Modified GVAR Approach.

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Asia-Pacific region is much anxious about China’s slowdown, but the rest of the world has definite reason to worry about the consequences of the slowdown in China. During last few decades China is strongly integrated with Asia and also with the rest of the World. This paper investigates what the impact of China’s slowdown on the global economy is. If any crisis in China, how much does it affect developed and emerging or developing economies? Using modified Global VAR (GVAR) model, this paper focuses on these issues. This study considers more on international linking variables for the period of 2000-2012. Evidence based on GVAR analysis for six developed countries (G6: USA, UK, Germany, Japan, Canada and Australia) and BRICS (G4: Brazil, Russia, India and South Africa) show that the impact of China’s slowdown is more on emerging BRICS nations than that of developed economies. Impact of China’s GDP growth shock on the rest of emerging Asia is more since it has a strong production network in East and South East Asia. So, China’s slowdown certainly affects Asia more than western developed economies.

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