Globalization and Changing Patterns in the International Transmission of Shocks in Financial Markets

42 Pages Posted: 21 Jun 2002 Last revised: 28 Oct 2010

See all articles by Michael D. Bordo

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics; National Bureau of Economic Research (NBER)

Antu Panini Murshid

University of Wisconsin - Milwaukee - Department of Economics

Date Written: June 2002

Abstract

In this paper we compare various characteristics of the cross-country transmission of shocks in the financial markets of both advanced and emerging countries during two periods of globalization -- the pre-World War I classical gold standard era, 1880-1914, and the post-Bretton Woods era, 1975-2000. Based on principal components analysis on monthly spreads on long-term sovereign bond yields and on an EMP measure of currency crises, an index of global stress, and impulse response functions from VARs estimated using weekly data on short-term interest rates, we conclude that financial market shocks were more globalized before 1914 compared to the present. We postulate that this difference in systemic stability between the two eras of globalization reflects factors such as strong cross-country interdependence fostered through links to gold, the growing financial maturity of advanced countries, and the widening of the center to include a more diverse group of countries spanning several regions.

Suggested Citation

Bordo, Michael D. and Murshid, Antu Panini, Globalization and Changing Patterns in the International Transmission of Shocks in Financial Markets (June 2002). NBER Working Paper No. w9019. Available at SSRN: https://ssrn.com/abstract=316798

Michael D. Bordo (Contact Author)

Rutgers University, New Brunswick - Department of Economics ( email )

New Brunswick, NJ
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Antu Panini Murshid

University of Wisconsin - Milwaukee - Department of Economics ( email )

210 N. Maryland Avenue
Bolton Hall, 856
Milwaukee, WI 53211
United States
414-229-4402 (Phone)
414-229-3860 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
37
Abstract Views
1,098
PlumX Metrics