nep-ifn New Economics Papers
on International Finance
Issue of 2014‒01‒17
two papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Global Spillovers into Domestic Bond Markets in Emerging Market Economies By Laura Jaramillo; Anke Weber
  2. The Global Crisis and Equity Market Contagion By Geert Bekaert; Michael Ehrmann; Marcel Fratzscher; Arnaud Mehl

  1. By: Laura Jaramillo; Anke Weber
    Abstract: While fiscal conditions remain healthier than in advanced economies, emerging economies continue to be exposed to negative spillovers if global conditions were to become less favorable. This paper finds that domestic bond yields in emerging economies are heavily influenced by two international factors: global risk appetite and global liquidity. Using a novel approach, the analysis goes on to show that the vulnerability of emerging economies to these factors is not uniform but rather depends on country specific characteristics, namely fiscal fundamentals, financial sector openness and the external current account balance.
    Keywords: Spillovers;Bond markets;Emerging markets;Public debt;Bond Markets, Emerging Market Economies, Fiscal Deficit, Public Debt, Global Spillovers
    Date: 2013–12–23
  2. By: Geert Bekaert; Michael Ehrmann; Marcel Fratzscher; Arnaud Mehl
    Abstract: We analyze the transmission of the financial crisis of 2007 to 2009 to 415 country-industry equity portfolios. We use a factor model to predict crisis returns, defining unexplained increases in factor loadings and residual correlations as indicative of contagion. While we find evidence of contagion from the U.S. and the global financial sector, the effects are small. By contrast, there has been substantial contagion from domestic markets to individual domestic portfolios, with its severity inversely related to the quality of countries' economic fundamentals. This confirms the "wake-up call" hypothesis, with markets focusing more on country-specific characteristics during the crisis.
    Keywords: contagion; financial crisis; equity markets; global transmission; market integration; country risk; factor model; financial policies; FX reserves, current account
    JEL: F3 G14 G15
    Date: 2014

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