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Expected worsening or improving financial instability and the 2008 financial crisis

Author

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  • Agarwal, Manmohan
  • Walsh, Sean
  • Wang, Jing
  • Whalley, John
  • Yan, Chen

Abstract

We focus on the external sector component of financial instability and link changes in country imbalances to GDP growth rates in ways to produce indices of expected worsening or improving financial instability at different points in time. Our results suggest that depending upon the index used and the base date chosen for comparison, different implications emerge for the linkage between external sector imbalances, perceived future instability and hence the possible onset of a financial crisis. The implication we drawn is that links between imbalances and best policy response to 2008 crisis asserted by the G20 may be more tenuous than claimed.

Suggested Citation

  • Agarwal, Manmohan & Walsh, Sean & Wang, Jing & Whalley, John & Yan, Chen, 2013. "Expected worsening or improving financial instability and the 2008 financial crisis," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 92-105.
  • Handle: RePEc:eee:ecofin:v:26:y:2013:i:c:p:92-105 DOI: 10.1016/j.najef.2013.07.002
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    References listed on IDEAS

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    Cited by:

    1. Gómez-Puig, Marta & Sosvilla-Rivero, Simón & Ramos-Herrera, María del Carmen, 2014. "An update on EMU sovereign yield spread drivers in times of crisis: A panel data analysis," The North American Journal of Economics and Finance, Elsevier, vol. 30(C), pages 133-153.
    2. Dungey, Mardi & Jacobs, Jan P.A.M. & Lestano,, 2015. "The internationalisation of financial crises: Banking and currency crises 1883–2008," The North American Journal of Economics and Finance, Elsevier, vol. 32(C), pages 29-47.
    3. Brzeszczyński, Janusz & Gajdka, Jerzy & Kutan, Ali M., 2015. "Investor response to public news, sentiment and institutional trading in emerging markets: A review," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 338-352.

    More about this item

    Keywords

    External sector imbalances; Financial instability; Index approach; Financial crisis;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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