Working Paper: NBER ID: w9479
Authors: Graciela L. Kaminsky; Carmen Reinhart
Abstract: This paper studies how financial turbulence in emerging market countries can spread across borders. We construct indices of financial globalization' and evaluate the repercussions of turmoil in three emerging markets, which experienced financial crises in the late 1990s: Brazil, Russia, and Thailand. Our findings indicate that financial turbulence in these countries only spreads globally when they affect asset markets in one or more of the world's financial centers. Otherwise, spillovers are confined to countries in the same region. We also find that fragility in institutions in the financial centers is at the core of global spillovers while economic and monetary policy news contributes to regional spillovers.
Keywords: Financial Globalization; Emerging Markets; Financial Turmoil; Contagion; Spillovers
JEL Codes: F0; F20; F30; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial turbulence in emerging markets (F65) | global spillovers (F69) |
| fragility of institutions in financial centers (F65) | global spillovers (F69) |
| stability of financial centers (F65) | global spillovers (F69) |
| nature of the shock (D80) | extent of spillovers (F69) |
| economic and monetary policy news (E60) | regional spillovers (R12) |