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The transmission of emerging market shocks to global equity markets

Listed author(s):
  • Cuadro-Sáez, Lucía
  • Fratzscher, Marcel
  • Thimann, Christian

The paper analyzes whether, and to what extent, emerging market economies (EMEs) have systemic importance for global financial markets, above and beyond their influence during crises episodes. Using a novel database of exogenous economic and political shocks for 14 systematically relevant EMEs, we find that EME shocks not only have a statistically but also economically significant impact on global equity markets. The economic significance of EME shocks is in particular underlined by their remarkably persistent effects over time. Importantly, EMEs are found to influence global equity markets about just as much in "good" times as in "bad" times, though they tend to be stronger during crises or periods of financial turbulence. Finally, we detect a large degree of heterogeneity in the transmission of EME shocks to individual countries' equity markets, stressing the different degrees of financial exposure, which is relatively higher for European equity markets.

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Article provided by Elsevier in its journal Journal of Empirical Finance.

Volume (Year): 16 (2009)
Issue (Month): 1 (January)
Pages: 2-17

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Handle: RePEc:eee:empfin:v:16:y:2009:i:1:p:2-17
Contact details of provider: Web page: http://www.elsevier.com/locate/jempfin

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