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A Contagion through Exposure to Foreign Banks during the Global Financial Crisis

Author

Listed:
  • Park, Cyn-Young

    (Asian Development Bank)

  • Shin, Kwanho

    (Korea University)

Abstract

Although the global financial crisis of 2008 took root in the advanced countries, its shocks spread through the emerging economies, reflecting the increasingly interconnected global financial system. This paper develops an empirical methodology to test the contagion effect at the country level using bilateral data on bank claims between countries. It measures the direct and indirect exposures of emerging economies to crisis countries and tests whether these matter for capital outflows from emerging economies. The paper measures these exposures to the crisis-affected countries by using bilateral foreign claims sourced from Bank for International Settlements (i) consolidated banking statistics foreign claims on immediate counterparty and ultimate risk bases and (ii) locational banking statistics cross-border total claims. Findings show that emerging market economies more exposed directly or indirectly to banks in the crisis-affected countries suffered more capital outflows during the global financial crisis.

Suggested Citation

  • Park, Cyn-Young & Shin, Kwanho, 2017. "A Contagion through Exposure to Foreign Banks during the Global Financial Crisis," ADB Economics Working Paper Series 516, Asian Development Bank.
  • Handle: RePEc:ris:adbewp:0516
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    References listed on IDEAS

    as
    1. Hyun Song Shin, 2009. "Reflections on Northern Rock: The Bank Run That Heralded the Global Financial Crisis," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 101-119, Winter.
    2. Donghyun Park & Arief Ramayand & Kwanho Shin, 2016. "Capital Flows During Quantitative Easing: Experiences of Developing Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(4), pages 886-903, April.
    3. World Bank, 2016. "World Development Indicators 2016," World Bank Publications - Books, The World Bank Group, number 23969.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ana Kristel Lapid & Rogelio Jr Mercado & Peter Rosenkranz, 2021. "Concentration in Asia’s Cross-border Banking: Determinants and Impacts," Trinity Economics Papers tep0121, Trinity College Dublin, Department of Economics.

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    More about this item

    Keywords

    capital outflows; contagion; direct/indirect exposures; global financial crisis; interconnectedness;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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