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Globalization and Changing Patterns in the International Transmission of Shocks in Financial Markets

Michael Bordo () and Antu Murshid ()

No 9019, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we compare various characteristics of the cross-country transmission of shocks in the financial markets of both advanced and emerging countries during two periods of globalization -- the pre-World War I classical gold standard era, 1880-1914, and the post-Bretton Woods era, 1975-2000. Based on principal components analysis on monthly spreads on long-term sovereign bond yields and on an EMP measure of currency crises, an index of global stress, and impulse response functions from VARs estimated using weekly data on short-term interest rates, we conclude that financial market shocks were more globalized before 1914 compared to the present. We postulate that this difference in systemic stability between the two eras of globalization reflects factors such as strong cross-country interdependence fostered through links to gold, the growing financial maturity of advanced countries, and the widening of the center to include a more diverse group of countries spanning several regions.

JEL-codes: F20 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-ifn
Date: 2002-06
Note: DAE IFM ME
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Published as Bordo, Michael D. and Antu Panini Murshid. "Globalization And Changing Patterns In The International Transmission Of Shocks In Financial Markets," Journal of International Money and Finance, 2006, v25(4,Jun), 655-674.

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