Developing countries’ financial vulnerability to the euro crisis: An event study of equity and bond markets
AbstractThe global crisis highlights the continued vulnerability of developing countries to shocks from advanced economies. Just a few years after the global crisis, the eurozone sovereign debt crisis has emerged as the single biggest threat to the global outlook. In this paper, we apply the event study methodology to gauge the scope for financial contagion from the EU to developing countries. More specifically, we estimate the responsiveness of equity and bond markets in developing countries to global crisis news and euro crisis news. Overall, we find that whereas global crisis news had a consistently negative effect on returns of equity and bond markets in developing countries, the effect of euro crisis news was more mixed and limited.
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Date of creation: May 2012
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Find related papers by JEL classification:
- F30 - International Economics - - International Finance - - - General
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-15 (All new papers)
- NEP-CBA-2012-05-15 (Central Banking)
- NEP-EEC-2012-05-15 (European Economics)
- NEP-IFN-2012-05-15 (International Finance)
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