Are there Long Term Consequences to China's Deflationary Bout? Case of the ASEAN

Abstract Recent deflationary episodes in China, particularly observed in early July 2023, have prompted concerns about their potential impact on global economies. This study specifically examines the influence of China’s deflation on select ASEAN economies. Unlike prior research that primarily focuses on inflationary spillovers, this study focuses on the critical yet less explored area of deflation spillovers and its effect on key macroaggregates. The findings reveal that the deflationary shocks are relatively muted, with limited long-term impacts on the ASEAN-5 economies. Notably, while some countries like Malaysia show immediate responses, overall effects remain minimal. These insights inform policymakers about the resilience of ASEAN-5 economies and guide the development of strategies to maintain regional economic stability amidst potential deflationary challenges JEL Classification. C32, D83, E52, E58, E66