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Identifying the global transmission of the 2007-2009 financial crisis in a GVAR model

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  • Chudik, Alexander
  • Fratzscher, Marcel

Abstract

The paper analyses and compares the role that the tightening in liquidity conditions and the collapse in risk appetite played for the global transmission of the financial crisis. Dealing with identification and the large dimensionality of the empirical exercise with a Global VAR approach, the findings highlight the diversity of the transmission process. While liquidity shocks have had a more severe impact on advanced economies, it was mainly the decline in risk appetite that affected emerging market economies. The tightening of financial conditions was a key transmission channel for advanced economies, whereas for emerging markets it was mainly the real side of the economy that suffered. Moreover, there are some striking differences also within types of economies, with Europe being more adversely affected by the fall in risk appetite than other advanced economies.

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File URL: http://www.sciencedirect.com/science/article/B6V64-51SWG5F-2/2/28d75e1ce1ed055f7f09a4df5b96d184
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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 55 (2011)
Issue (Month): 3 (April)
Pages: 325-339

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Handle: RePEc:eee:eecrev:v:55:y:2011:i:3:p:325-339

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Web page: http://www.elsevier.com/locate/eer

Related research

Keywords: Liquidity Risk Financial crisis Global transmission Global VAR (GVAR) Shocks Modelling US Advanced economies Emerging market economies;

References

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Citations

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Cited by:
  1. Sophie Brana & Marie-Louise Djibenou & Stéphanie Prat, 2012. "Global excess liquidity and asset prices in emerging countries: a pvar approach," Working Papers hal-00740102, HAL.
  2. Nguyen, Ha & Qian, Rong, 2013. "Demand collapse or credit crunch to firms ? evidence from the world bank's financial crisis survey in Eastern Europe," Policy Research Working Paper Series 6651, The World Bank.
  3. Eickmeier, Sandra & Ng, Tim, 2011. "How do credit supply shocks propagate internationally? A GVAR approach," Discussion Paper Series 1: Economic Studies 2011,27, Deutsche Bundesbank, Research Centre.
  4. Sebnem Kalemli-Ozcan & Elias Papaioannou & Fabrizio Perri, 2012. "Global Banks and Crisis Transmission," NBER Working Papers 18209, National Bureau of Economic Research, Inc.
  5. Guidi, Francesco & Ugur, Mehmet, 2012. "Are South East Europe stock markets integrated with regional and global stock markets?," MPRA Paper 44133, University Library of Munich, Germany, revised Dec 2012.
  6. Kotkatvuori-Örnberg, Juha & Nikkinen, Jussi & Äijö, Janne, 2013. "Stock market correlations during the financial crisis of 2008–2009: Evidence from 50 equity markets," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 70-78.
  7. Josef Schreiner, 2012. "Developments in Selected CESEE Countries: Heterogeneous Growth Performance, Improving Fiscal and External Accounts," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2.
  8. Dale F. Gray, 2013. "Modeling Banking, Sovereign, and Macro Risk in a CCA Global VAR," IMF Working Papers 13/218, International Monetary Fund.
  9. Lagoarde-Segot, Thomas & Leoni, Patrick L., 2013. "Pandemics of the poor and banking stability," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4574-4583.
  10. Jesús Crespo Cuaresma & Martin Feldkircher, 2012. "Drivers of Output Loss during the 2008–09 Crisis: A Focus on Emerging Europe," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2.
  11. Hong-Ghi Min & Young-Soon Hwang, 2012. "Dynamic correlation analysis of US financial crisis and contagion: evidence from four OECD countries," Applied Financial Economics, Taylor & Francis Journals, vol. 22(24), pages 2063-2074, December.
  12. Cesa-Bianchi, Ambrogio, 2013. "Housing cycles and macroeconomic fluctuations: A global perspective," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 215-238.
  13. Milcheva, Stanimira, 2013. "Cross-country effects of regulatory capital arbitrage," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5329-5345.
  14. Gazi Salah Uddin & Mohamed Arouri & Aviral Kumar Tiwari, 2014. "Co-movements between Germany and International Stock Markets: Some New Evidence from DCC-GARCH and Wavelet Approaches," Working Papers 2014-143, Department of Research, Ipag Business School.
  15. Jesús Crespo Cuaresma & Martin Feldkircher & Florian Huber, 2014. "Forecasting with Bayesian Global Vector Autoregressive Models: A Comparison of Priors," Working Papers 189, Oesterreichische Nationalbank (Austrian Central Bank).
  16. Wang, Lihong, 2014. "Who moves East Asian stock markets? The role of the 2007–2009 global financial crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 182-203.
  17. Hagen, Tobias, 2013. "Impact of national financial regulation on macroeconomic and fiscal performance after the 2007 financial shock: Econometric analyses based on cross-country data," Economics Discussion Papers 2013-26, Kiel Institute for the World Economy.
  18. Hagen, Tobias, 2013. "Impact of national financial regulation on macroeconomic and fiscal performance after the 2007 financial stock: Econometric analyses based on cross-country data," Working Paper Series: Business and Law 02, Frankfurt University of Applied Sciences, Faculty of Business and Law.

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