Are emerging market indicators of vulnerability to financial crises decoupling from global factors?
AbstractThis paper assesses the extent to which common factors underlie indicators of vulnerability to financial crises in emerging market economies (EMEs) and whether this link is changing over time. We use a Bayesian dynamic common factor model to estimate their common component in a sample of up to 41 countries including both developed as well as emerging economies. This permits us to interpret the component in common to both of them as a global factor. We introduce time variation into the model to investigate whether indicators are decoupling from global factors over time. While decoupling can be observed in a few cases, the exposure to global factors in most countries tends to fluctuate around the mean. Broadly speaking then, the answer is no.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 36 (2012)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/jbf
Financial crises; Bayesian dynamic common factor models; Decoupling;
Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
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