Spill Over Effect

The term “spillover effect” describes how seemingly unrelated events in one country can have a control on the economies of neighbouring countries.

Although there also are positive spillover effects, the phrase is most often accustomed to describe the adverse consequences of a domestic event, like an earthquake, exchange crisis, or another macro event, that impact other regions on the planet.

Spillover effects is a subset of network effects that became more prevalent because the financial ties between nations’ economies have grown stronger because of globalization in commerce and stock markets.

An illustration of spillover effects is the trading connection between the US and Canada.

For example, if consumer spending within the U.S. drops, it’s spillover effects on the economies that rely upon the U.S. as their major export market.

The larger an economy is, the more spillover effects it’s likely to cause across the worldwide economy. Nations and markets may be easily influenced by domestic unrest because the U.S. is that the world’s economic leader.