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China’s financial spillovers to emerging markets

Author

Listed:
  • Rodolfo G. Campos

    (Banco de España)

  • Ana-Simona Manu

    (EUROPEAN CENTRAL BANK)

  • Luis Molina

    (Banco de España)

  • Marta Suárez-Varela

    (Banco de España)

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.

Suggested Citation

  • Rodolfo G. Campos & Ana-Simona Manu & Luis Molina & Marta Suárez-Varela, 2024. "China’s financial spillovers to emerging markets," Working Papers 2435, Banco de España.
    • Handle: RePEc:bde:wpaper:2435
    DOI: https://doi.org/10.53479/37815
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    More about this item

    Keywords

    China; emerging markets; financial spillovers;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • N26 - Economic History - - Financial Markets and Institutions - - - Latin America; Caribbean

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