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Analysing interconnectivity among economies

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  • Wong, Alfred Y-T.
  • Fong, Tom Pak Wing

Abstract

As international financial integration gathers pace, interconnectivity has increased tremendously among financial institutions, financial markets and financial systems, a phenomenon to which the recent global financial crisis perhaps provided the best testimony. The interconnectivity among financial entities at various levels is multilateral in dimension and highly complicated with numerous feedback loops. To contribute to the understanding of the complexity of the global financial system, this study shows how the interconnected relationships can be disentangled into simple and quantifiable bilateral interdependence linkages, using 11 Asia-Pacific economies as an example. A major finding is that all these economies register a significantly higher sovereign risk once the condition that another economy is in distress is imposed.

Suggested Citation

  • Wong, Alfred Y-T. & Fong, Tom Pak Wing, 2011. "Analysing interconnectivity among economies," Emerging Markets Review, Elsevier, vol. 12(4), pages 432-442.
  • Handle: RePEc:eee:ememar:v:12:y:2011:i:4:p:432-442
    DOI: 10.1016/j.ememar.2011.06.004
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    References listed on IDEAS

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    Cited by:

    1. Fong, Tom Pak Wing & Wong, Alfred Y-T., 2012. "Gauging potential sovereign risk contagion in Europe," Economics Letters, Elsevier, vol. 115(3), pages 496-499.

    More about this item

    Keywords

    Financial integration; Interconnectivity; Sovereign risk; Credit risk; Value-at-risk; Systemic risk; Contagion; Spillover; Tail risk; Asia Pacific; Quantile regression;

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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