Opinion
China's Volatile Stock Market Does Not Reflect Real Economic Conditions
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On balance, it seems to me best to think of the current volatility as structural in character, sending extreme and misleading signals about the economy.
By A. Michael Spence
Markets plunged again this week, a mini quake with the apparent epicenter in China. The question on the minds of economic policy makers and investors is what is going on and what will the future hold?
It would be tempting to attribute all of this to fears of faltering growth and imbalances in the Chinese economy. But that can't be right. The Chinese economy, at roughly three quarters the size of America's and Europe's, is systemically important. But even an extreme slowdown in China would not derail the whole global economy.
The overriding context appears to be extreme uncertainty about the causes and consequences of these moves, leading to very high volatility.
Read full article as published in The Huffington Post
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A. Michael Spence is the William R. Berkley Professor in Economics & Business.
It would be tempting to attribute all of this to fears of faltering growth and imbalances in the Chinese economy. But that can't be right. The Chinese economy, at roughly three quarters the size of America's and Europe's, is systemically important. But even an extreme slowdown in China would not derail the whole global economy.
The overriding context appears to be extreme uncertainty about the causes and consequences of these moves, leading to very high volatility.
Read full article as published in The Huffington Post
___
A. Michael Spence is the William R. Berkley Professor in Economics & Business.