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The transmission of emerging market shocks to global equity markets

Listed author(s):
  • Lucía Cuadro Sáez

    ()

    (Banco de España)

  • Marcel Fratzscher

    ()

    (European Central Bank)

  • Christian Thimann

    ()

    (European Central Bank)

The paper analyses 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 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, i.e. 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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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/07/Fic/dt0727e.pdf
File Function: First version, October 2007
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Paper provided by Banco de España & Working Papers Homepage in its series Working Papers with number 0727.

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Length: 35 pages
Date of creation: Sep 2007
Handle: RePEc:bde:wpaper:0727
Contact details of provider: Web page: http://www.bde.es/

Web page: http://www.bde.es/bde/en/secciones/informes/Publicaciones_se/docs/
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