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Financial Spillovers to Emerging Markets During the Global Financial Crisis

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  • Nathaniel Frank
  • Heiko Hesse

Abstract

In this paper potential financial linkages between liquidity and bank solvency measures in advanced economies and emerging market (EM) bond and stock markets are analyzedduring the latest crisis. A multivariate GARCH model is estimated in order to gauge the extent of co-movements of these financial variables across markets. The findings indicate that the notion of possible de-coupling (in the financial markets) had been misplaced. While EM stock markets reached their peak in the last quarter of 2007, interlinkages between funding stress and equity markets in advanced economies and EM financial indicators were highly correlated and have seen sharp increases during specific crisis moments.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/104.

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Length: 20
Date of creation: 01 May 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/104

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Keywords: Emerging markets; Liquidity; Banking sector; Developed countries; Developing countries; Economic models; Spillovers; Stock markets; bond; stock market; financial crisis; financial institutions; contagion; equity markets; financial markets; bond spreads; financial contagion; global financial crisis; asset markets; financial crises; hedge; sovereign bond; equity market; financial indicators; financial market; money market; hedge funds; rating agencies; bond markets; stock market volatility; bond spread; financial distress; financial stability; contingent liabilities; interbank money markets; credit booms; money markets; bond returns; systemic crisis; systemic risk; stock market crash; bonds; foreign equity; recession; foreign bond; asian crisis; international bond markets; emerging stock markets; high-yield bonds; currency depreciation; moral hazard;

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References

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  1. Dell''Ariccia, Giovanni & Igan, Deniz & Laeven, Luc, 2008. "Credit Booms and Lending Standards: Evidence From The Subprime Mortgage Market," CEPR Discussion Papers 6683, C.E.P.R. Discussion Papers.
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