Original scientific paper

https://doi.org/10.1080/1331677X.2021.2025123

Does China transmit financial cycle spillover effects to the G7 countries?

Shuanglian Chen
Junhao Zhong
Pierre Failler

Abstract

We use the state space model to describe the financial cycles of
China and G7 countries since 1990, and the DY spillover index to
quantify the spillover effects of China’s financial cycles on G7
countries. We find that China plays the role of a net recipient
most of the time. China’s financial cycle net spillover index fluctuates widely and is vulnerable to economic events such as the
financial crisis. This implies that international capital flows have
brought volatility and shocks to the Chinese financial market,
such as the Asian financial crisis and the 2008 international financial crisis. In addition, during 2004-2005 and 2014-2015, the G7
countries also suffered from financial cycle spillover from China.
The US received most of the financial cycle spillover from China,
followed by Canada, Germany, and Italy.

Keywords

financial cycle; spillover effect; state-space model; DY spillover index

Hrčak ID:

302841

URI

https://hrcak.srce.hr/302841

Publication date:

31.3.2023.

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