Working Paper: NBER ID: w8569
Authors: Graciela L. Kaminsky; Carmen M. Reinhart
Abstract: In this paper, we examine which markets are most synchronized internationally and exhibit the greater extent of comovement. We focus on daily data for four asset markets: bonds, equities, foreign exchange, and domestic money market. Our sample covers thirty-five developed and emerging market countries during 1997-1999. The extent of comovement and responsiveness to external shocks is examined in different ways. To measure the response of these markets to adverse external shocks, we date the peaks in domestic interest rates and bond spreads and the largest daily declines in equity prices and assess the extent of clustering around the same period. We also analyze which markets show evidence of greatest comovement in general, irrespective of whether there are adverse shocks or not.
Keywords: No keywords provided
JEL Codes: F30; F31; F36
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| peaks in domestic interest rates (E43) | bond market responses (E43) |
| bond spreads (G12) | bond market responses (E43) |
| financial turmoil (G01) | equity prices (G12) |
| comovement among markets (G10) | sensitivity to external shocks (F41) |
| external shocks (F69) | bond market responses (E43) |
| external shocks (F69) | equity prices (G12) |