expected, when the global financial crisis is controlled for, the point estimates of spillovers from EM7 to other EFM are slightly smaller than what the baseline model suggests. Spillovers in the baseline model are marginally smaller than those in the alternative model specification assuming exogenous oil prices. This suggests that an increase in oil prices induced by the increase in growth in EM7, as in the baseline model, offsets some of the favorable spillover effects to other EFM given the latter’s net-oil importing status. The point estimates of spillovers from BRICS are also insignificantly different from those from EM7 given the overlapping confidence bands. While the point estimates of spillovers from the rest of the alternative model specifications deviate somewhat from those of the baseline model, those deviations are statistically insignificant as well. All in all, a robust finding from all these specifications is that spillover estimates are sizeable and statistically significant. We obtain very similar results when the baseline model is estimated by including VIX instead of EMBI. Our headline results are also robust to the inclusion or exclusion of U.S. interest rates.

We also check the robustness of the spillover estimates from individual EM7. The baseline model measures spillovers from each of the EM7 while controlling for the rest of the EM7. This guards against any potential bias in spillover estimates from, say Brazil, if spillovers from the rest of the EM7 (e.g. China) were significant. For robustness, we measure spillovers from each of the EM7 without controlling for the rest of EM7.

Figure 7A presents the results from the aggregate model. The point estimates are quite close to the baseline specification (Figure 5A). More importantly, our headline result remains that China dominates as a spillover source among the EM7. In addition, as in the baseline specification, spillovers from Russia, while smaller than China’s, are non-trivial while spillovers from the rest of the EM7 economies are negligible and/or statistically insignificant. Figures 7B presents the results from the alternative specification of the country model. These are in line with the baseline results (Figure 5B) as well. In sum, our earlier finding that among the EM7, spillovers from China are the largest and have a global outreach is robust to changes in the model specification.

# 5 Conclusion

We provide empirical estimates of spillovers from the largest seven emerging market (EM7) economies using a parsimonious VAR model. Our paper adds to the existing literature on spillovers from the major emerging markets in several dimensions. First, by using a large quarterly dataset that includes advanced, emerging, and frontier economies, it assesses the global implications of spillovers from EM7. Second, it examines how spillovers from EM7 compare with those originating from the G7. Third, using a common methodology, it includes a disciplined comparison of spillovers originating from the individual EM7 economies in the context of a model that includes all the major variables that are featured in a standard small open economy DSGE model.

Our results suggest that spillovers from EM7 to other emerging and frontier markets are sizeable: a 1 percentage point increase in EM7 growth can raise growth in other EFM by about 0.9 percentage point in cumulative terms at the end of 3 years. On the contrary, we find that spillovers from EM7 to advanced economies are, on average, modest and statistically insignificant. On balance, global growth could increase by 0.6 percentage point at the three-year horizon reflecting the economic size of emerging markets, in particular EM7. Among the EM7 economies, spillovers from China are the largest and permeate globally. Sizeable as they are, spillovers from EM7 are somewhat smaller than those originating from G7 economies.

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