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Transmission of China’s Shocks to the BRIS Countries
Published Date:
2014-07-22
Author:
Mustafa Çakir and Alain Kabundi
Last Modified Date:
2021-12-08, 10:16 AM
Category:
Publications > Working Papers
This paper investigates the impact of China on the BRIS countries, namely Brazil, Russia, India and South Africa. We identify Chinese supply and demand shocks and assess their transmission to BRIS in a structural dynamic factor model framework estimated over the period 1995Q2-2009Q4. The findings show that Chinese supply shocks are more important than its demand shocks. Supply shocks produce positive and significant output responses in all BRIS countries. While supply shocks have a permanent impact on the BRIS countries, the effects of demand shocks are short-lived. Both supply and demand shocks are transmitted through trade rather than financial linkages. However, the responses of BRIS countries are heterogeneous and therefore they require different policy responses.