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Would a Growth Slowdown in Emerging Markets Spill Over to High-income Countries?: A Quantitative Assessment

Author

Listed:
  • Patrice Ollivaud

    (OECD)

  • Elena Rusticelli

    (OECD)

  • Cyrille Schwellnus

    (OECD)

Abstract

Growth in emerging market economies (EMEs) is set to durably slow from the rates observed over 2010-12 as cyclical effects fade, potential growth declines and external financing conditions tighten. Large negative current account balances make some EMEs vulnerable to sudden reversals in capital flows while exceptionally rapid credit expansions, as those observed in Brazil, China, Poland and Turkey over the past years, may have raised financial risk. This paper assesses recent developments and vulnerabilities in EMEs and uses macroeconometric model simulations to provide quantitative estimates of spillovers to highincome countries. The results suggest that for each slowdown of 2 percentage points in EMEs, highincome countries’ growth could be around ⅔ percentage points lower on average, with around ½ percentage point accounted for by trade. Experience with past EME crises suggests that this could be exacerbated by effects from exchange rates and by financial market turbulence. OECD countries which would be hit hardest include Belgium, Japan and the Netherlands, reflecting mainly strong trade linkages with EMEs. Quelles retombées d'un ralentissement dans les pays émergents sur les pays à haut revenu ? : Une évaluation quantitative La croissance dans les économies des marchés émergents (EMEs) va se ralentir durablement par rapport à la période 2010-2012 à mesure de la disparition des effets cycliques, du déclin de la croissance potentielle et du durcissement des conditions financières externes. D’importants déficits de la balance des transactions courantes rendent certains EMEs vulnérables à des inversions soudaines des flux de capitaux tandis que des expansions rapides des crédits, comme ceux observées ces dernières années au Brésil, en Chine, Pologne et Turquie, ont pu augmenter les risques financiers. Ce papier montre les récents développements et les vulnérabilités des EMEs ; il utilise en outre des simulations d’un modèle macroéconométrique pour donner une estimation quantitative des effets sur les pays à haut revenu. Les résultats suggèrent que pour chaque ralentissement de 2 points de pourcentage des EMEs, les pays à haut revenu auraient une croissance environ ⅔ point de pourcentage plus basse en moyenne, avec à peu près ½ point de pourcentage qui viendrait du commerce. Au vu de l’expérience des EMEs avec les crises passées, cet effet pourrait être augmenté par des effets via les taux de change et des turbulences sur les marchés financiers. Les pays de l’OCDE les plus touchés seraient la Belgique, le Japon et les Pays-Bas, ce qui reflète principalement les liens commerciaux importants qu’ils ont avec les EMEs.

Suggested Citation

  • Patrice Ollivaud & Elena Rusticelli & Cyrille Schwellnus, 2014. "Would a Growth Slowdown in Emerging Markets Spill Over to High-income Countries?: A Quantitative Assessment," OECD Economics Department Working Papers 1110, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1110-en
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    File URL: http://dx.doi.org/10.1787/5jz5m89p82d8-en
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    Cited by:

    1. Kang, Hyunju & Suh, Hyunduk, 2015. "Reverse spillover: Evidence during emerging market financial turmoil in 2013–2014," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 38(C), pages 97-115.

    More about this item

    Keywords

    commerce international; croissance; emerging markets; growth; marchés émergents; spillovers; trade;

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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