China's footprint in global financial markets

David Lodge, Ana-Simona Manu and Ine Van Robays

No 1/2024, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: Using daily data since 2017, we disentangle China-specific structural shocks driving Chinese financial markets and examine spillovers across global markets. The novelty of this paper consists of simultaneously identifying China shocks with shocks emanating from the United States and shocks to global risk sentiment - two major forces driving global financial markets - to ensure that China spillover estimates do not reflect common factors. Our results show that shocks originating in China have material impacts on global equity markets, although spillovers are much smaller than those following shocks in the United States, or those triggered by shifts in global risk sentiment. By contrast, shocks from China account for a significant proportion of variation in global commodity prices, more on a par with those of the United States. Nevertheless, spillovers from China can be significantly amplified in an environment of heightened global volatility, or when the shocks are large.

Keywords: China shocks; spillovers; global financial markets; commodities (search for similar items in EconPapers)
JEL-codes: E44 E52 G15 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-cna and nep-fmk
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Related works:
Working Paper: China’s footprint in global financial markets (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:283609

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