"The main transmission channel is the tightening of financial conditions from the rise in risk premia, which hits systemic advanced economies. The impact on emerging Asia is moderate, despite Japan’s close regional ties, partly because the effect on China’s risk premium is small. Finally, it may be noted that the larger impact on Latin America could reflect Japanese fx retail positions in investment trusts in countries such as Brazil; the larger effect on Europe relative to the United States likely reflects the size and depth of US financial markets, which is also reflected in a lower transmission of higher JGB yields to US yields."
The report analyzed what Nouriel Roubini called the "global perfect storm" for 2013 (less the JGB yield spike). The IMF's "G-35 model" said that stocks could fall by 15% if the U.S. falls off the fiscal cliff (tightens fiscal policy).
"The largest—not necessarily the most likely—hit to US growth comes from the G-35 model because it treats the cliff as temporary (i.e., private consumption does not rise to offset lower public demand), and since it builds in negative confidence effects (i.e., a 15 percent drop in stock prices, partially offset by lower long bond yields on account of the lower debt path). The spillovers from this model are also larger, and operate mainly via trade channels, which is why neighbors are most affected (Fig. 15)."
Source: http://www.imf.org/external/np/pp/eng/2012/070912.pdf via RTT News