Financial Spillovers to Emerging Markets During the Global Financial Crisis

Nathaniel Frank and Heiko Hesse

No 2009/104, 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: WP; emerging market; market; subprime crisis; EM country; Emerging Markets; Liquidity; Solvency; GARCH; market volatility; CDS measure; EM economy; high-yielding EM currency; emerging market equity; Stock markets; Emerging and frontier financial markets; Securities markets; Yield curve; Global; Europe; Africa; Asia and Pacific (search for similar items in EconPapers)
Pages: 20
Date: 2009-05-01
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Citations: View citations in EconPapers (91)

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Journal Article: Financial Spillovers to Emerging Markets during the Global Financial Crisis (2009)
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