The responses of BRICS Equities to China's Slowdown: A Multi-Scale Causality Analysis

Jamal Bouoiyour (1) , Refk Selmi (1)

1 CATT - Centre d'Analyse Théorique et de Traitement des données économiques

Growth in China has been slowing in 2015 below its long-run average. This worsening outlook has been synchronized among emerging markets with sharp slowdown. The paper looks at the responses of four BRICS (Brazil, Russia, India and South Africa) stock markets to deepening worries over slowing growth in the world’s second-largest economy. To properly examine the peculiarities of these spillovers, we carry out relatively new methods that rise in signal theory: the causality testing-based Empirical Mode Decomposition (EMD) and the frequency domain causality test. These techniques allow capturing hidden factors driving uncertainty spillovers within BRICS stock markets. The results support robust evidence that the severity of China’s slowdown impact was not uniform across BRICS equities. In particular, South Africa hasn’t been rattled as badly as Brazil, Russia and India (in this order). The intensity of bilateral trade and investment relationships, the position of market in terms of regulation and securities exchanges, the financial system efficiency, the gold’s role as safest haven and the distribution of companies belonging to cyclical and defensive industries in overall stock market indices have been put forward to explain the heterogeneous BRICS responses.

Mots clés: China's slowdown; BRICS equities; Multi-scale causality analysis

Domaines: Economies et finances

Jamal Bouoiyour, Refk Selmi. The responses of BRICS Equities to China's Slowdown: A Multi-Scale Causality Analysis. 2016. ⟨hal-01880323⟩