Are EME indicators of vulnerability to financial crises decoupling from global factors?

Guillermo Felices () and Tomasz Wieladek
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Guillermo Felices: Citi

No 410, Bank of England working papers from Bank of England

Abstract: This paper assesses the extent to which common factors underlie indicators of vulnerability to financial crises in emerging market economies and whether this link is changing over time. We use a Bayesian dynamic common factor model to estimate their common component in a sample of up to 41 countries including both developed as well as emerging economies. This permits us to interpret the component in common to both of them as a global factor. We introduce time-variation into the model to investigate whether indicators are decoupling from global factors over time. While decoupling can be observed in a few cases, the exposure to global factors in most countries tends to fluctuate around the mean. Broadly speaking then, the answer is no.

Keywords: Financial crises; Bayesian dynamic common factor models; decoupling (search for similar items in EconPapers)
JEL-codes: C11 C22 F34 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2011-02-21
New Economics Papers: this item is included in nep-ifn
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0410

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