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Analysing Interconnectivity among Economies


  • Alfred Wong

    (Research Department, Hong Kong Monetary Authority)

  • Tom Fong

    (Research Department, Hong Kong Monetary Authority)


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

  • Alfred Wong & Tom Fong, 2010. "Analysing Interconnectivity among Economies," Working Papers 1003, Hong Kong Monetary Authority.
  • Handle: RePEc:hkg:wpaper:1003

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    References listed on IDEAS

    1. Glenn D. Rudebusch & Eric T. Swanson & Tao Wu, 2006. "The Bond Yield "Conundrum" from a Macro-Finance Perspective," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 24(S1), pages 83-109, December.
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    More about this item


    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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