The Transmission of Financial Stress from Advanced to Emerging Economies

Stephan Danninger, Irina Tytell, Ravi Balakrishnan and Selim Elekdag

No 2009/133, IMF Working Papers from International Monetary Fund

Abstract: This paper studies how financial stress is transmitted from advanced to emerging economies, using a new financial stress index for emerging economies. An episode of financial stress is defined as a period when the financial system's ability to intermediate may be impaired. Previous financial crises in advanced economies passed through strongly and rapidly to emerging economies. In line with this pattern, the unprecedented spike in financial stress in advanced economies elevated financial stress across emerging economies above levels seen during the Asian crisis, but with significant cross-country variation. The extent of pass-through of financial stress is related to the depth of financial linkages between advanced and emerging economies. The paper finds that higher current account and fiscal balances do little to insulate emerging economies from the transmission of financial stress in advanced economies. However, they may help dampen the impact on the real sector of emerging economies and help reestablish financial stability and foreign capital inflows once financial stress subsides.

Keywords: WP; advanced economy; financial market; banking crisis (search for similar items in EconPapers)
Pages: 52
Date: 2009-06-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (174)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=23039 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2009/133

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().