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Emerging markets and financial crises: Regional, global or isolated shocks?

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  • Kenourgios, Dimitris
  • Padhi, Puja

Abstract

This paper investigates financial contagion of three emerging market crises of the late 1990s, as well as the subprime crisis of 2007, focusing on financial markets of emerging economies, USA and 2 global indices. Conventional cointegration and vector error correction analysis show long and short run dynamics only among emerging stock markets during the Russian and the Asian crises, for both stock and bond markets during the subprime crisis, while the Argentine turmoil has no impact on any of the examined markets. Further analysis into a multivariate time-varying asymmetric framework provides evidence on the global impact of the Russian default, the contagion effects of the subprime crisis, the regional aspect of the Asian crisis and the isolated nature of the Argentine turmoil. Moreover, stock markets seem to constitute a stronger transmission mechanism during the three contagious crises. Our findings have crucial implications for international investors, policy makers and multi-lateral organizations.

Suggested Citation

  • Kenourgios, Dimitris & Padhi, Puja, 2012. "Emerging markets and financial crises: Regional, global or isolated shocks?," Journal of Multinational Financial Management, Elsevier, vol. 22(1), pages 24-38.
  • Handle: RePEc:eee:mulfin:v:22:y:2012:i:1:p:24-38
    DOI: 10.1016/j.mulfin.2012.01.002
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial crises; Contagion; Emerging market economies; Asymmetric dynamic conditional correlations;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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