The economic effects of a potential armed conflict over Taiwan

Christopher Neely

No 2024-034, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This article examines the likely economic effects of a Chinese invasion or blockade of Taiwan for the U.S. and the world by considering historical precedents. Such a conflict would likely produce a flight-to-safety in the asset market, huge disruptions in international trade, and banking problems, and it would greatly exacerbate existing fiscal pressures. The authorities of the People’s Republic of China would probably try to sell U.S. and other western securities prior to a conflict to avoid sanctions on those assets. Such sales would be temporarily disruptive but would likely have only marginal effects on yields in the longer term. Long-term effects would include disrupted trade, higher price levels, higher levels of nominal debt, and higher taxes.

Keywords: war; Taiwan; foreign exchange reserves; asset prices; flight-to-safety; international trade; sanctions (search for similar items in EconPapers)
JEL-codes: F40 G12 G14 G15 H56 O24 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2024-09-27, Revised 2025-01-28
New Economics Papers: this item is included in nep-cna and nep-int
Note: Publisher DOI: https://doi.org/10.20955/r.2025.03
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Federal Reserve Bank of St. Louis Review

Downloads: (external link)
https://s3.amazonaws.com/real.stlouisfed.org/wp/2024/2024-034.pdf Full text (application/pdf)

Related works:
Journal Article: The Economic Effects of a Potential Armed Conflict Over Taiwan (2025)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:98963

Ordering information: This working paper can be ordered from

DOI: 10.20955/wp.2024.034

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().