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Spillover Effects of Asian Financial Markets on the Global Markets

Author

Listed:
  • Mariko Tanaka

    (Associate Professor, Department of Economics, Faculty of Economics, Musashino University)

  • Shin-ichi Fukuda

    (Professor, Graduate School of Economics, University of Tokyo)

Abstract

This paper aims to find out how much stronger the spillover effects of a shock in Asian financial markets on the global financial markets have become since the GFC (Global Financial Crisis). In the first half of the analysis, the paper analyzes spillover effects in stock markets. An estimation based on a GVAR model shows that the impacts of a shock in Asian emerging economies have become stronger since the GFC. However, the increase in Asian impacts is attributable to a shock in the manufacturing sector, rather than in the financial sector. This suggests that the increase in the spillover effects since the GFC reflects an increase in the impacts of a shock in the manufacturing sector in Asian emerging economies. In the second half of the analysis, the paper examines spillover effects across foreign exchange rates, focusing on effects originating from the Chinese Yuan. Based on the data on changes in the Chinese Yuan’s exchange rate between 1 AM and 2 AM GMT, this analysis reveals that exchange rate policy changes made by the People’s Bank of China (PBC) have had positive spillover effects on many developed countries since the summer of 2015. The results of this empirical analysis suggest that amid the growth in Asia’s presence in the global economy, Asia’s impacts are increasing in the global financial markets as well.

Suggested Citation

  • Mariko Tanaka & Shin-ichi Fukuda, 2019. "Spillover Effects of Asian Financial Markets on the Global Markets," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 15(1), pages 151-174, July.
    • Handle: RePEc:mof:journl:ppr15_01_07
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    emerging economies; cross-border spillover effects; Asian financial market;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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