The Increasing Impact of Spain on the Equity Markets of Brazil, Chile and Mexico

Abstract:     
The article examines the response of equity markets in Brazil, Chile and Mexico to stock prices in the US, Spain and four major European countries during three sub-periods: 1988 to 1994, 1995 to 1998, and 1999 to 2004. The analysis employs VAR models. Our results appear to depend on the openness of the country in terms of international trade. We find that there is an increasing impact of Spain on the equity markets. The increasing linkages between Spain and these three countries (such as more trade and foreign direct investment), in particular in the case of Brazil, may explain the results.

Keywords: Emerging Markets, Latin America, Spain, Stock Markets Interdependence, VAR

JEL Classifications: F30, G15, O54, C22

Working Paper Series