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Financial markets in times of stress

  • Kaminsky, Graciela L.
  • Reinhart, Carmen M.

In this paper, we examine which markets are most synchronized internationally and exhibit the greater extent of comovement. We focus on daily data for four asset markets: bonds, equities, foreign exchange, and domestic money market. Our sample covers thirty-five developed and emerging market countries during 1997-1999. The extent of comovement and responsiveness to external shocks is examined in different ways. To measure the response of these markets to adverse external shocks, we date the peaks in domestic interest rates and bond spreads and the largest daily declines in equity prices and assess the extent of clustering around the same period. We also analyze which markets show evidence of greatest comovement in general, irrespective of whether there are adverse shocks or not.

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 69 (2002)
Issue (Month): 2 (December)
Pages: 451-470

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Handle: RePEc:eee:deveco:v:69:y:2002:i:2:p:451-470
Contact details of provider: Web page: http://www.elsevier.com/locate/devec

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  1. Edison, Hali & Reinhart, Carmen M., 2001. "Stopping hot money," Journal of Development Economics, Elsevier, vol. 66(2), pages 533-553, December.
  2. Bank for International Settlements, 1999. "A Review of Financial Market Events in Autumn 1998," CGFS Papers, Bank for International Settlements, number 12, Autumn.
  3. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  4. Reinhart, Carmen M & Reinhart, Vincent R, 1999. "On the Use of Reserve Requirements in Dealing with Capital Flow Problems," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(1), pages 27-54, January.
  5. Edwards, Sebastian & Susmel, Raul, 2001. "Volatility dependence and contagion in emerging equity markets," Journal of Development Economics, Elsevier, vol. 66(2), pages 505-532, December.
  6. Carmen M. Reinhart, 2000. "Mirage of Floating Exchange Rates," American Economic Review, American Economic Association, vol. 90(2), pages 65-70, May.
  7. Dornbusch, Rudiger & Park, Yung Chul & Claessens, Stijn, 2000. "Contagion: Understanding How It Spreads," World Bank Research Observer, World Bank Group, vol. 15(2), pages 177-97, August.
  8. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1996. "Contagious Currency Crises," CEPR Discussion Papers 1453, C.E.P.R. Discussion Papers.
  9. Reinhart, Carmen, 2000. "The mirage of floating exchange rates," MPRA Paper 13736, University Library of Munich, Germany.
  10. Graciela L. Kaminsky & Carmen M. Reinhart, 2001. "Bank Lending and Contagion: Evidence from the Asian Crisis," NBER Chapters, in: Regional and Global Capital Flows: Macroeconomic Causes and Consequences, NBER-EASE Volume 10, pages 73-99 National Bureau of Economic Research, Inc.
  11. Eichengreen, Barry & Rose, Andrew & Wyplosz, Charles, 1996. " Contagious Currency Crises: First Tests," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 463-84, December.
  12. Frankel, Jeffrey A, 1992. "Measuring International Capital Mobility: A Review," American Economic Review, American Economic Association, vol. 82(2), pages 197-202, May.
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