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Twin trade shocks: Spillovers from US-China trade tensions

Author

Listed:
  • Alexei Kireyev
  • Andrei Leonidov

Abstract

The paper assesses international spillovers from a twin demand shock, originating sequentially in two large economies. Using a network-based spillover model, the paper concludes that while the initial shock may be modest, the network effects in shock spillovers can be substantial, comparable, and often exceed the initial shock. Individual countries may amplify, absorb, or block spillovers. To illustrate the model, the paper quantifies the macroeconomic impact of a hypothetical reduction of bilateral trade between the United States and China as a result of mutual trade restriction.

Suggested Citation

  • Alexei Kireyev & Andrei Leonidov, 2021. "Twin trade shocks: Spillovers from US-China trade tensions," International Economics, CEPII research center, issue 167, pages 174-188.
    • Handle: RePEc:cii:cepiie:2021-q3-167-7
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    File URL: https://www.sciencedirect.com/science/article/pii/S2110701721000470
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    More about this item

    Keywords

    Shocks; Spillover; Trade; Network; China; China;
    All these keywords.

    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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