| Abstract: |
The seven largest emerging market economiess - China, India, Brazil, Russia,
Mexico, Indonesia, and Turkey - constituted more than one-quarter of global
output and more than half of global output growth during 2010-15. These
emerging markets, which we call EM7, are also closely integrated with other
countries, especially with other emerging and frontier markets. Given their
size and integration, growth in EM7 could have significant cross-border
spillovers. We provide empirical estimates of these spillovers using a
Bayesian vector autoregression model. We report three main results. First,
spillovers from EM7 are sizeable: a 1 percentage point increase in EM7 growth
is associated with a 0.9 percentage point increase in growth in other emerging
and frontier markets and a 0.6 percentage point increase in world growth at
the end of three years. Second, sizeable as they are, spillovers from EM7 are
still smaller than those from G7 countries (Group of Seven of advanced
economies). Specifically, growth in other emerging and frontier markets, and
the global economy would increase by one-half to three times more due to a
similarly sized increase in G7 growth. Third, among the EM7, spillovers from
China are the largest and permeate globally. |