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DTSTART:20251102T020000
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DESCRIPTION:Moynihan Institute of Global Affairs and the Trade\, Developmen
t and Political Economy program is proud to host Eva Van Leemput\, \;C
hief\, Emerging Market Economies Section\, \;Board of Governors of the
Federal Reserve System.Spillovers from China to global financial markets
have been\nfound to be small owing to China’s limited integration in the g
lobal financial\nsystem. In this paper\, however\, we provide evidence tha
t China constitutes an\nimportant driver of the global financial cycle. We
argue that because of\nChina’s importance for global consumption\, strong
er Chinese growth raises\nglobal growth prospects\, inducing an increase i
n global risk sentiment and an\nexpansion in global asset prices and globa
l credit. Two contributions are key\nto this finding:(1) We construct a me
asure of China’s credit impulse to\nidentify Chinese policy-induced demand
shocks. Our approach takes advantage of\nthe fact that a primary tool of
China’s stabilization policy—encompassing\nmonetary\, fiscal\, and regulat
ory policies—is controlling the amount of credit\nin the economy. Without
China’s credit impulse\, it is difficult to discern\nglobal financial spil
lovers\; (2) We estimate an alternative measure of Chinese\nGDP growth tha
t captures its business cycle given data concerns about the\nsmoothness of
official GDP data. Without China’s alternative GDP measure\, it is\ndiffi
cult to attribute any global cycle movements to economic developments in\n
China.
DTEND:20230327T211500Z
DTSTAMP:20260417T031243Z
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SUMMARY:What Happens in China Does Not Stay in China
UID:RFCALITEM639119779632257626
X-ALT-DESC;FMTTYPE=text/html:Moynihan Institute of Global Affairs and th
e Trade\, Development and Political Economy program is proud to host Eva V
an Leemput\, \;Chief
\, Emerging Market Economies Section\, \;Board of Governors of the Federal Reserve Syst
em.
Spillovers from China to global financial markets hav
e been\nfound to be small owing to China’s limited integration in the glob
al financial\nsystem. In this paper\, however\, we provide evidence that C
hina constitutes an\nimportant driver of the global financial cycle. We ar
gue that because of\nChina’s importance for global consumption\, stronger
Chinese growth raises\nglobal growth prospects\, inducing an increase in g
lobal risk sentiment and an\nexpansion in global asset prices and global c
redit. Two contributions are key\nto this finding:
(1) We construct a measure of China’s credit impulse to\nidentify
Chinese policy-induced demand shocks. Our approach takes advantage of\nth
e fact that a primary tool of China’s stabilization policy—encompassing\nm
onetary\, fiscal\, and regulatory policies—is controlling the amount of cr
edit\nin the economy. Without China’s credit impulse\, it is difficult to
discern\nglobal financial spillovers\;
(2) We estimate an alternat
ive measure of Chinese\nGDP growth that captures its business cycle given
data concerns about the\nsmoothness of official GDP data. Without China’s
alternative GDP measure\, it is\ndifficult to attribute any global cycle m
ovements to economic developments in\nChina.
END:VEVENT
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