In this paper we compare various characteristics of the cross-country transmission of shocks in the financial markets of both advanced and emerging countries during two periods of globalization -- the pre-World War I classical gold standard era, 1880-1914, and the post-Bretton Woods era, 1975-2000. Based on principal components analysis on monthly spreads on long-term sovereign bond yields and on an EMP measure of currency crises, an index of global stress, and impulse response functions from VARs estimated using weekly data on short-term interest rates, we conclude that financial market shocks were more globalized before 1914 compared to the present. We postulate that this difference in systemic stability between the two eras of globalization reflects factors such as strong cross-country interdependence fostered through links to gold, the growing financial maturity of advanced countries, and the widening of the center to include a more diverse group of countries spanning several regions.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
9019.
Length: Date of creation: Jun 2002 Date of revision: Handle: RePEc:nbr:nberwo:9019
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Find related papers by JEL classification: F20 - International Economics - - International Factor Movements and International Business - - - General F31 - International Economics - - International Finance - - - Foreign Exchange
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