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The transmission of emerging market shocks to global equity markets

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Author Info
Cuadro-Sáez, Lucía
Fratzscher, Marcel
Thimann, Christian

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Abstract

The paper analyzes whether, and to what extent, emerging market economies (EMEs) have systemic importance for global financial markets, above and beyond their influence during crises episodes. Using a novel database of exogenous economic and political shocks for 14 systematically relevant EMEs, we find that EME shocks not only have a statistically but also economically significant impact on global equity markets. The economic significance of EME shocks is in particular underlined by their remarkably persistent effects over time. Importantly, EMEs are found to influence global equity markets about just as much in "good" times as in "bad" times, though they tend to be stronger during crises or periods of financial turbulence. Finally, we detect a large degree of heterogeneity in the transmission of EME shocks to individual countries' equity markets, stressing the different degrees of financial exposure, which is relatively higher for European equity markets.

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File URL: http://www.sciencedirect.com/science/article/B6VFG-4T5JHTT-1/2/dce1f2dbf91a16fffa9ab1d2509cddd0
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Publisher Info
Article provided by Elsevier in its journal Journal of Empirical Finance.

Volume (Year): 16 (2009)
Issue (Month): 1 (January)
Pages: 2-17
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Handle: RePEc:eee:empfin:v:16:y:2009:i:1:p:2-17

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

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Related research
Keywords: Global financial markets Transmission Financial integration Shocks News Emerging market economies Mature economics Euro area United States;

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Dieter Gerdesmeier & Francesco Paolo Mongelli & Barbara Roffia, 2007. "The Eurosystem, the US Federal Reserve and the Bank of Japan - similarities and differences," Working Paper Series 742, European Central Bank. [Downloadable!]
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  2. Julian von Landesberger, 2007. "Sectoral money demand models for the euro area based on a common set of determinants," Working Paper Series 741, European Central Bank. [Downloadable!]
  3. Barbara Roffia & Andrea Zaghini, 2007. "Excess money growth and inflation dynamics," Working Paper Series 749, European Central Bank. [Downloadable!]
    Other versions:
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