Changing Vulnerability in Asia: Contagion and Systemic Risk

46 Pages Posted: 4 May 2020

See all articles by Mardi H. Dungey

Mardi H. Dungey

University of Tasmania (deceased); Financial Research Network (FIRN) (deceased)

Moses Kangogo

University of Tasmania

Vladimir Volkov

Tasmania School of Business and Economics, University of Tasmania

Date Written: May 30, 2019

Abstract

This paper investigates the changing network of financial markets between Asian markets and those of the rest of the world during January 2003–December 2017 to capture both the direction and strength of the links between them. Because each market chooses whether to connect with emerging markets as a bridge to the wider network, there are advantages to having access to this bridge for protection during periods of financial stress. Both parties gain by overcoming the information asymmetry between emerging and global markets. We analyze networks for four key periods, capturing networks in financial markets before and after the Asian financial crisis and the global financial crisis. Increased connections during crisis periods are evident, as well as a general deepening of the global network. The evidence on Asian market developments suggests caution is needed on regulations proposing methods to create stable networks, because these may result in reduced opportunities for emerging markets.

Keywords: Asian markets, financial crises, networks

JEL Classification: C21, N25, G01, G15

Suggested Citation

Dungey, Mardi H. and Kangogo, Moses and Volkov, Vladimir, Changing Vulnerability in Asia: Contagion and Systemic Risk (May 30, 2019). Asian Development Bank Economics Working Paper Series No. 583, Available at SSRN: https://ssrn.com/abstract=3590170 or http://dx.doi.org/10.2139/ssrn.3590170

Mardi H. Dungey

University of Tasmania (deceased)

Financial Research Network (FIRN) (deceased)

Moses Kangogo (Contact Author)

University of Tasmania

French Street
Sandy Bay
Tasmania, 7250
Australia

Vladimir Volkov

Tasmania School of Business and Economics, University of Tasmania ( email )

French Street
Sandy Bay
Tasmania, 7250
Australia

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