International Economics

<< N°167

Issue Q3 2021  
Twin trade shocks: Spillovers from US-China trade tensions  
Alexei Kireyev
Andrei Leonidov
The paper assesses international spillovers from a twin demand shock, originating sequentially in two large economies. Using a network-based spillover model, the paper concludes that while the initial shock may be modest, the network effects in shock spillovers can be substantial, comparable, and often exceed the initial shock. Individual countries may amplify, absorb, or block spillovers. To illustrate the model, the paper quantifies the macroeconomic impact of a hypothetical reduction of bilateral trade between the United States and China as a result of mutual trade restriction.

Shocks ; Spillover ; Trade ; Network ; China ; China ; Keywords
C45 ; F14 ; F41 ; F42 ; F47 ; JEL classification
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