A Contagion Through Exposure to Foreign Banks During the Global Financial Crisis

30 Pages Posted: 27 Jun 2017

See all articles by Cyn-Young Park

Cyn-Young Park

Asian Development Bank

Kwanho Shin

Korea University

Multiple version iconThere are 2 versions of this paper

Date Written: March 2017

Abstract

Although the global financial crisis of 2008 took root in the advanced countries, its shocks spread through the emerging economies, reflecting the increasingly interconnected global financial system. This paper develops an empirical methodology to test the contagion effect at the country level using bilateral data on bank claims between countries. It measures the direct and indirect exposures of emerging economies to crisis countries and tests whether these matter for capital outflows from emerging economies. The paper measures these exposures to the crisis-affected countries by using bilateral foreign claims sourced from Bank for International Settlements (i) consolidated banking statistics foreign claims on immediate counterparty and ultimate risk bases and (ii) locational banking statistics cross-border total claims. Findings show that emerging market economies more exposed directly or indirectly to banks in the crisis-affected countries suffered more capital outflows during the global financial crisis.

Keywords: contagion, interconnectedness, direct/indirect exposures, capital outflows, global financial crisis

JEL Classification: E44, F15, F21, F34, F38, F42, F62

Suggested Citation

Park, Cyn-Young and Shin, Kwanho, A Contagion Through Exposure to Foreign Banks During the Global Financial Crisis (March 2017). Available at SSRN: https://ssrn.com/abstract=2993526 or http://dx.doi.org/10.2139/ssrn.2993526

Cyn-Young Park (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines
(632) 632-5473 (Phone)

HOME PAGE: http://www.adb.org

Kwanho Shin

Korea University ( email )

1 Anam-dong 5 ka
Sunbuk-Ku, Department of Economics
Seoul 136-701
Korea
82-2-3290-2220 (Phone)
82-2-3290-2719 (Fax)

HOME PAGE: econ.korea.ac.kr/~khshin

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