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The center and the periphery: The globalization of financial turmoil

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  • Reinhart, Carmen
  • Kaminsky, Graciela

Abstract

This paper studies how financial turbulence in emerging market countries can spread across borders. We construct indices of “financial globalization” and evaluate the repercussions of turmoil in three emerging markets that experienced financial crises in the late 1990s: Brazil, Russia, and Thailand. Our findings indicate that financial turbulence in these countries only spreads globally when they affect asset markets in one or more of the world’s financial centers. Otherwise, spillovers are confined to countries in the same region. Also, episodes of worldwide globalization of turmoil are mostly episodes of synchronized crashes while regional turbulence include both joint crashes and rallies.

Suggested Citation

  • Reinhart, Carmen & Kaminsky, Graciela, 2008. "The center and the periphery: The globalization of financial turmoil," MPRA Paper 14100, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:14100
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    References listed on IDEAS

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    More about this item

    Keywords

    financial crises contagion stock prices exchange rate crashes turbulence interest rate spreads default;

    JEL classification:

    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F30 - International Economics - - International Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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