GLOBAL RECESSION AND EUROZONE DEBT CRISIS - IMPACT ON EXPORTS OF CHINA AND INDIA

We study the impact of recent crisis episodes viz. the global recession of 2008-09 and the Eurozone debt crisis of 2010-12 on the Emerging Market Economies (EMEs) of China and India. Macroeconomic indicators suggest that both China and India were impacted by the crises. We focus on the trade channel of transmission of the crises i.e. on exports from China and India to the U.S. and Euro Area respectively. This study finds that the exports from China and India to both the destinations were affected as a result of the crisis episodes with major exporting sectors of the two economies displaying negative rates of growth. Further, Markovswitching autoregressive models are utilized to examine the regimes in the growth rate of total value of exports to the U.S. and Eurozone. We find presence of slowdown and pickup regimes in the export growth rates. Furthermore, Markov-switching regression results suggest that the economic activity levels in the U.S. and the Eurozone significantly and positively affect the exports to these destinations from China and India across high as well as low export growth rate regimes. As a result, a dampening of the economic activity in the U.S. and Eurozone in the wake of the crises led to a reduction in the rate of growth of exports from China and India due to a fall in the demand for exports.