How could a shock to growth in China affect growth in the United Kingdom?

Quarterly Bulletin 2016 Q1
Published on 18 March 2016

By Ambrogio Cesa-Bianchi and Kate Stratford

This article assesses how a shock to Chinese growth could affect the UK economy using an empirical model of the world economy that exploits the historical comovement between international business cycles. We find that a 1% slowing in China is likely to reduce UK GDP by around 0.1%. This impact arises mainly from the increasingly important role of China in the global economy - that is, via the United Kingdom’s indirect links with China through its main trading partners.

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How could a shock to growth in Chinese GDP affect GDP growth in the United Kingdom and through what channels might that effect be transmitted? Co-author Ambrogio Cesa-Bianchi discusses a model that helps answer these questions.

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