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The Global Financial Crisis and Transmission Channels: An International Network Analysis

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  • Changmo Ahn
  • Gyemin Lee
  • Dongkoo Chang

Abstract

This paper analyzes the effects of the trade and financial networks on the propagation of the global financial crisis of 2008. We adopt a new methodology that incorporates a dynamic network approach into econometric analysis. Some interesting results are obtained. Firstly, both the trade and financial networks provide clear pictures of international economic linkages. Secondly, both the trade and financial networks do not have any significant effect on the growth rate of real GDP worldwide, but have a significant effect within particular country groups. The trade network especially, contributes a negative contagion impact on the Chiang Mai Initiative (CMI) and Latin economies while the financial network contributes a negative contagion effect on the Asia-Pacific and inflation targeting countries. Thirdly, the financial network, however, has a worldwide positive consequence on share price index. Finally, the real effective exchange rate overvaluation among the country-specific fundamentals has a significant negative impact on the real GDP growth rate and stock market performance.

Suggested Citation

  • Changmo Ahn & Gyemin Lee & Dongkoo Chang, "undated". "The Global Financial Crisis and Transmission Channels: An International Network Analysis," Working Papers wp07, South East Asian Central Banks (SEACEN) Research and Training Centre.
  • Handle: RePEc:sea:wpaper:wp07
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    References listed on IDEAS

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    1. Park, Cyn-Young, 2013. "Asian Capital Market Integration: Theory and Evidence," ADB Economics Working Paper Series 351, Asian Development Bank.
    2. AndrewK. Rose & MarkM. Spiegel, 2010. "Cross-Country Causes And Consequences Of The 2008 Crisis: International Linkages And American Exposure," Pacific Economic Review, Wiley Blackwell, vol. 15(3), pages 340-363, August.
    3. Levy Yeyati, Eduardo & Williams, Tomas, 2012. "Emerging economies in the 2000s: Real decoupling and financial recoupling," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 2102-2126.
    4. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2009. "Financial Instability, Reserves, and Central Bank Swap Lines in the Panic of 2008," American Economic Review, American Economic Association, vol. 99(2), pages 480-486, May.
    5. Imbs, Jean, 2006. "The real effects of financial integration," Journal of International Economics, Elsevier, vol. 68(2), pages 296-324, March.
    6. Naylor, Michael J. & Rose, Lawrence C. & Moyle, Brendan J., 2007. "Topology of foreign exchange markets using hierarchical structure methods," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 382(1), pages 199-208.
    7. Yung Chul Park & Kwanho Shin, 2009. "Economic Integration and Changes in the Business Cycle in East Asia: Is the Region Decoupling from the Rest of the World?-super-," Asian Economic Papers, MIT Press, vol. 8(1), pages 107-140, Winter.
    8. Trancoso, Tiago, 2014. "Emerging markets in the global economic network: Real(ly) decoupling?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 395(C), pages 499-510.
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