Financial markets and international risk sharing in emerging market economics
AbstractIn light of rapidly increasing foreign equity liability positions of emerging market economies, we test for a necessary condition of international risk sharing, namely for systematic patterns between idiosyncratic output fluctuations and financial market developments. Panel analysis of 22 emerging market economies shows strong evidence for pro-cyclicality of capital gains on domestic stock markets both over short and medium term horizons. This implies that domestic output fluctuations can be hedged through cross-border ownership of financial markets. JEL Classification: F21, F30, G15
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Bibliographic InfoPaper provided by European Central Bank in its series Working Paper Series with number 1451.
Date of creation: Jul 2012
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Other versions of this item:
- Martin Schmitz, 2013. "Financial Markets And International Risk Sharing In Emerging Market Economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 18(3), pages 266-277, 07.
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F30 - International Economics - - International Finance - - - General
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-16 (All new papers)
- NEP-CBA-2012-09-16 (Central Banking)
- NEP-FMK-2012-09-16 (Financial Markets)
- NEP-IFN-2012-09-16 (International Finance)
- NEP-OPM-2012-09-16 (Open Economy Macroeconomic)
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