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Euro-Crisis and Spillover Effects on the Emerging Economies

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  • Hamidreza Tabarraei

    (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

I present some evidence showing that the advanced economies' banks were contributing in spreading the Euro-crisis to the emerging economies. For this purpose, I test the common lender channel among other channels of contagion, by using international banking flows data. Based on a constructed crisis-index for the Euro area, I find that countries with higher level of exposure to GIIPS, deleveraged more in riskier periods, i.e. during periods with high crisis index. Among all emerging economies in our sample, the Latin American countries were not affected as much as the emerging economies Asia and Europe, despite their high exposures to Spain. While the impact of the Euro-crisis stopped to show sign in Asia after 2011, it continued to affect the emerging Europe. The Euro-area banks were deleveraging more in the Emerging Europe than their peers in non-Euro advanced economies, whereas most of their deleveraging in Asia happened in 2010. Although the results present evidence in favour of local impacts of the Euro-crisis, they show the importance of spillover through multinational banks.

Suggested Citation

  • Hamidreza Tabarraei, 2014. "Euro-Crisis and Spillover Effects on the Emerging Economies," PSE Working Papers halshs-00952153, HAL.
  • Handle: RePEc:hal:psewpa:halshs-00952153
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00952153
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    References listed on IDEAS

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    Cited by:

    1. Viktor Dinev, 2017. "Risks and benefits for new member states of the European Union in their entry in the Euro area in the context of the debt crisis," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 112-130.
    2. Kang, Hyunju & Suh, Hyunduk, 2015. "Reverse spillover: Evidence during emerging market financial turmoil in 2013–2014," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 38(C), pages 97-115.

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    Keywords

    Sovereign risk; Contagion; euro crisis; emerging economies;
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