The Center and the Periphery: The Globalization of Financial Turmoil

47 Pages Posted: 2 Feb 2003 Last revised: 21 Jun 2009

See all articles by Graciela Kaminsky

Graciela Kaminsky

National Bureau of Economic Research (NBER); George Washington University - Department of Economics

Carmen M. Reinhart

Peter G. Peterson Institute for International Economics; National Bureau of Economic Research (NBER)

Date Written: February 2003

Abstract

This paper studies how financial turbulence in emerging market countries can spread across borders. We construct indices of financial globalization' and evaluate the repercussions of turmoil in three emerging markets, which experienced financial crises in the late 1990s: Brazil, Russia, and Thailand. Our findings indicate that financial turbulence in these countries only spreads globally when they affect asset markets in one or more of the world's financial centers. Otherwise, spillovers are confined to countries in the same region. We also find that fragility in institutions in the financial centers is at the core of global spillovers while economic and monetary policy news contributes to regional spillovers.

Suggested Citation

Kaminsky, Graciela and Reinhart, Carmen M., The Center and the Periphery: The Globalization of Financial Turmoil (February 2003). NBER Working Paper No. w9479. Available at SSRN: https://ssrn.com/abstract=375331

Graciela Kaminsky

National Bureau of Economic Research (NBER)

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George Washington University - Department of Economics ( email )

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HOME PAGE: http://www.gracielakaminsky.com/

Carmen M. Reinhart (Contact Author)

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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