Financial Spillovers to Emerging Markets during the Global Financial Crisis

Heiko Hesse () and Nathaniel Frank

No 09/104, IMF Working Papers from International Monetary Fund

Abstract: In this paper potential financial linkages between liquidity and bank solvency measures in advanced economies and emerging market (EM) bond and stock markets are analyzedduring the latest crisis. A multivariate GARCH model is estimated in order to gauge the extent of co-movements of these financial variables across markets. The findings indicate that the notion of possible de-coupling (in the financial markets) had been misplaced. While EM stock markets reached their peak in the last quarter of 2007, interlinkages between funding stress and equity markets in advanced economies and EM financial indicators were highly correlated and have seen sharp increases during specific crisis moments.

Keywords: Banking sector; Bond markets; Capital markets; Cross country analysis; Developed countries; Developing countries; Economic models; Emerging markets; Financial crisis; Liquidity; Spillovers; Stock markets (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-fmk
Date: 2009-05-20
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