1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Would a Growth Slowdown in Emerging Markets Spill Over to High-income Countries?

A Quantitative Assessment

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.

English

Keywords: trade, growth, spillovers, emerging markets
JEL: 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 / Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation: Models and Applications; F20: International Economics / International Factor Movements and International Business / International Factor Movements and International Business: General; F42: International Economics / Macroeconomic Aspects of International Trade and Finance / International Policy Coordination and Transmission
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