Global Market Conditions and Systemic Risk

Brenda González-Hermosillo and Heiko Hesse
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Brenda González-Hermosillo: Visiting Professor of Finance, Sloan School of Management, Massachusetts Institute of Technology, 100 Main Street, E62-612, Cambridge, MA 02142. E-mail: bgh@mit.edu

Journal of Emerging Market Finance, 2011, vol. 10, issue 2, 227-252

Abstract: This article examines several key global market conditions, such as a proxy for market uncertainty and measures of interbank funding stress, to assess financial volatility and the likelihood of crisis. Using Markov regime-switching techniques, it shows that the Lehman Brothers failure was a watershed event in the crisis, although signs of heightened systemic risk could be detected as early as February 2007. In addition, we analyse the role of global market conditions to help determine when governments should begin to exit their extraordinary public support measures.

Keywords: JEL Classification: C32; JEL Classification: E44; JEL Classification: G12; Systemic risk; global financial crises; emerging markets; subprime crisis; volatility; solvency; Markov regime-switching techniques (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:10:y:2011:i:2:p:227-252

DOI: 10.1177/097265271101000204

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