The transmission of emerging market shocks to global equity markets

Lucía Cuadro Sáez (), Marcel Fratzscher () and Christian Thimann ()

No 724, Working Paper Series from European Central Bank

Abstract: The paper analyses whether, and to what extent, emerging market economies (EMEs) have systemic importance for global financial markets, above and beyond their influence during crises episodes. Using a novel database of exogenous economic and political shocks for 14 systematically relevant EMEs, we find that EME shocks not only have a statistically but also economically significant impact on global equity markets. The economic significance of EME shocks is in particular underlined by their remarkably persistent effects over time. Importantly, EMEs are found to influence global equity markets about just as much in “good” times as in “bad” times, i.e. during crises or periods of financial turbulence. Finally, we detect a large degree of heterogeneity in the transmission of EME shocks to individual countries’ equity markets, stressing the different degrees of financial exposure, which is relatively higher for European equity markets. JEL Classification: F36; F30; G15.

Keywords: Keywords: global financial markets; equity markets; transmission; financial integration; shocks; news; emerging market economies; mature economics; euro area; United States. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-rmg
Date: 2007-02
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Related works:
Working Paper: The transmission of emerging market shocks to global equity markets (2007)
Journal Article: The transmission of emerging market shocks to global equity markets (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:ecb:ecbwps:20070724

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