Money market pressure in emerging economies: International contagion versus domestic determinants

Scott Hegerty

Economic Systems, 2012, vol. 36, issue 4, 506-521

Abstract: Recent market turmoil has again raised the threat of banking crises worldwide. Might these crises be contagious internationally, or are fundamentals more likely to be responsible? This study creates monthly indices of “money market pressure” (MMP) for 20 emerging markets from 2002 to 2010, before using Vector Autoregressive (VAR) methods to test for various spillovers among money and foreign exchange markets. We find that MMP Granger-causes exchange market pressure (EMP) in most countries, but that causality does not run the other direction. Secondly, MMP seems to be more contagious in Southeast Asia than in Latin America or among large emerging markets globally, and the most financially open economies are most susceptible to “direct” spillovers that do not operate through exchange markets. Finally, when examining domestic influences in large emerging markets, output drops are most likely to increase MMP.

Keywords: Money market pressure; International contagion; Emerging markets; Time series (search for similar items in EconPapers)
JEL-codes: F36 F41 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:36:y:2012:i:4:p:506-521

DOI: 10.1016/j.ecosys.2012.05.001

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