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China’s Economic Slowdown and International Inflation Dynamics

Author

Listed:
  • L. Salzmann

    (Institute for Statistics and Econometrics, University of Kiel)

Abstract
I fit t a high-dimensional macroeconomic dataset of 41 countries to a factor-augmented vector autoregressive model to examine the role of the recent Chinese economic slowdown for international inflation dynamics. I identify Chinese supply and demand shocks and examine their contributions to international price indicators. My main fi ndings are: (i) Impulse response analyses indicate that Chinese business cycle shocks and especially demand shocks signi cantly spill over to inflation rates in Europe, North America, Asia and Oceania, mainly transmitted through global oil, commodity and manufacturing prices. (ii) The Chinese growth slowdown that started in 2012 can be attributed to a fall in aggregate Chinese demand and supply. (iii) Historical decompositions indicate that the fall in Chinese demand lowered national prices in Europe, North America, Asia and Oceania by up to 12 percent from the third quarter of 2013 on.

Suggested Citation

  • L. Salzmann, 2018. "China’s Economic Slowdown and International Inflation Dynamics," Working Papers 2018.03, International Network for Economic Research - INFER.
    • Handle: RePEc:inf:wpaper:2018.03
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    China's Economic Slowdown; Global in ation; Spillovers; Factor Augmented Vector Autoregressive Model;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • F - International Economics

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