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Globalization, financial crisis and contagion: time-dynamic evidence from financial markets of developing countries

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  • Simplice A, Asongu

Abstract

Financial integration among economies has the benefit of improving allocative efficiency and diversifying risk. However the recent global financial crisis, considered as the worst since the Great Depression has re-ignited the fierce debate about the merits of financial globalization and its implications for growth especially in developing countries. This paper examines whether equity markets in emerging countries were vulnerable to contagion during the recent financial meltdown. Findings show: (1) with the exception of India, Asian markets were worst hit; (2) but for Peru, Venezuela and Columbia, Latin American countries were least affected; (3) Africa and Middle East emerging markets were averagely contaminated with the exception of Kenya, Morocco, Dubai, Jordan and Lebanon. As a policy implication, India’s step-wise financial liberalization approach should be emulated. Lessons from Latin American fiscal and monetary policies should be learned and/or revised.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30120.

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Date of creation: 06 Apr 2011
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Handle: RePEc:pra:mprapa:30120

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Keywords: Globalization; Financial crisis; Contagion; developing countries; Equity Markets;

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  1. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, American Finance Association, vol. 57(5), pages 2223-2261, October.
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  6. Simplice A, Asongu, 2011. "Political crises and risk of financial contagion in developing countries: Evidence from Africa," MPRA Paper 37459, University Library of Munich, Germany.
  7. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1996. "Inflows of capital to developing countries in the 1990s," MPRA Paper 13707, University Library of Munich, Germany.
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  14. Maurice Obstfeld, 1984. "Rational and Self-Fulfilling Balance-of-Payments Crises," NBER Working Papers 1486, National Bureau of Economic Research, Inc.
  15. Simplice A., Asongu, 2011. "The 2011 Japanese earthquake, tsunami and nuclear crisis: evidence of contagion from international financial markets," MPRA Paper 39630, University Library of Munich, Germany.
  16. Yuliya Demyanyk & Vadym Volosovych, 2006. "Gains from Financial Integration in the European Union: Evidence for New and Old Members," Working Papers, Department of Economics, College of Business, Florida Atlantic University 06009, Department of Economics, College of Business, Florida Atlantic University, revised Aug 2007.
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Cited by:
  1. Asongu Simplice, 2013. "Globalization and Financial Market Contagion: Evidence from Financial Crisis and Natural Disasters," Working Papers 13/035, African Governance and Development Institute..
  2. Simplice A., Asongu, 2011. "Political Crises and Risk of Financial Contagion in Developing Countries: Evidence from Africa," MPRA Paper 30391, University Library of Munich, Germany.
  3. repec:pra:mprapa:39629 is not listed on IDEAS
  4. Simplice A., Asongu, 2011. "The 2011 Japanese earthquake, tsunami and nuclear crisis: evidence of contagion from international financial markets," MPRA Paper 39630, University Library of Munich, Germany.
  5. Simplice A, Asongu, 2012. "Globalization and Africa: implications for human development," MPRA Paper 36541, University Library of Munich, Germany.

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