The Emerging Market Crisis and Stock Market Linkages: Further Evidence

Abstract

This study examines the long-run price relationship and the dynamic price transmission among the U.S., Germany, and four major Eastern European emerging stock markets, with particular attention to the impact of the 1998 Russian financial crisis. The results show that both the long-run price relationship and the dynamic price transmission were strengthened among these markets after the crisis. The influence of Germany became noticeable on all the Eastern European markets only after the crisis but not before the crisis. We also conduct a rolling generalized VAR analysis to confirm the robustness of the main findings.

Keywords: market linkages, emerging stock markets, generalized impulse response analysis, generalized forecast error variance decomposition, rolling VAR analysis

JEL Classification: G15, C32