The viruss impact on other economies will be even

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The virus’s impact on other economies will be even more limited. During the last half-decade, many major central banks have developed models to gauge the impact of a slowdown in China on their economies. These models were not built with the current health crisis in mind, but they do take into account trade and financial linkages between China and their respective economies. As a rule of thumb, the negative impact of a decrease in China’s GDP growth on the U.S. and European economies is about one-fifth as large in percentage terms. For example, if the current coronavirus epidemic lowers China’s growth rate by 0.1 percentage point, then growth in the U.S. and Europe is likely to slow by about 0.02 percentage point. The impact on Aust ralia’s economy may be twice as large, given its stronger commodity-trade and tourism links with China, but a 0.04-percentage-point reduction in growth is still small. Of course, the impact on China and other economies could be more severe if the coronavirus crisis were to last much longer than this baseline scenario assumes. The coronavirus outbreak is understandably causing alarm in China and elsewhere. But from an economic perspective, it is too early to panic.
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IMPACT INSIGHTS January 2020 Electronic Components Industry Association 678-393-9990 310 Maxwell Road, Suite 200, Alpharetta, GA 30009 Other Investors who began the year feeling largely sanguine about the stock market are struggling to make sense of whether a growing coronavirus outbreak could upend their bets on a global economic recovery. Now that view is being tested. The Coronavirus threatens to hamper an already-slowing Chinese economy, in turn potentially jeopardizing the global recovery that many investors had counted on to materialize this year. After a steep drop on Monday, January 27th, markets bounced higher on Tuesday paring losses after anxiety over the outbreak sent stocks from Japan to Germany to the U.S. to their biggest one-day declines in months. Figure 8 Global Stock Performance Following Epidemics During prior outbreaks, markets proved resilient. Charles Schwab analysts found the MSCI World Index declined 5.5% in the month after January 2016, when the Zika virus spread to several countries, but returned 2.9% over the course of six months. In their analysis of 13 outbreaks since 1981, analysts at the firm found the index returned an average of 0.8% over a one-month period following an outbreak and 7.1% over a six-month period. Morningstar analysts came to a similar conclusion, finding that, among the companies they covered, none suffered a long-term effect from the 2003 SARS outbreak. In other words, even when stocks have taken a short-term hit from disease-related worries, they have tended to bounce back in the following months. That is because in recent decades it has been rare, if not unheard of, for a contagious disease to bring consumer spending to a halt around the world.
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  • Fall '19
  • People's Republic of China, Severe acute respiratory syndrome

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