Real and Financial Interdependencies: New Evidence for Asia, Eastern Europe and Latin America

Posted: 29 Jun 2010

See all articles by Geoff Stewart

Geoff Stewart

University of Southampton - Division of Economics

Jeo Lee

Isle of Man International Business School

Date Written: April 6, 2009

Abstract

Recent empirical research has emphasised the importance of regional contagion in explaining both the timing and severity of currency crises. In this paper we employ recently developed panel cointegration methods together with Granger causality tests to examine real and financial interrelationships among 19 emerging open economies over the period 2000-2008. We identify a cointegrated system of real and financial variables, including exchange rate volatility, and find strong evidence of cross-country real and financial interdependencies within Asia, Eastern Europe and Latin America, as well as for the panel as a whole.

Keywords: Cointegration, Contagion, Currency crises, Interdependency

JEL Classification: F31, F41, C22, C23

Suggested Citation

Stewart, Geoff and Lee, Jeo, Real and Financial Interdependencies: New Evidence for Asia, Eastern Europe and Latin America (April 6, 2009). Available at SSRN: https://ssrn.com/abstract=1632018

Geoff Stewart

University of Southampton - Division of Economics ( email )

Southampton, SO17 1BJ
United Kingdom

Jeo Lee (Contact Author)

Isle of Man International Business School ( email )

The University Centre
Old Castletown Road
Douglas Isle of Man, IM2 1QB
United Kingdom

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