The Transmission of Emerging Market Shocks to Global Equity Markets

43 Pages Posted: 19 Feb 2007

See all articles by Lucía Cuadro Sáez

Lucía Cuadro Sáez

Banco de España

Marcel Fratzscher

DIW Berlin; Centre for Economic Policy Research (CEPR)

Christian Thimann

AXA Group

Multiple version iconThere are 2 versions of this paper

Date Written: February 2007

Abstract

The paper analyses whether, and to what extent, emerging market economies (EMEs) have systemic importance for global financial markets, above and beyond their influence during crises episodes. Using a novel database of exogenous economic and political shocks for 14 systematically relevant EMEs, we find that EME shocks not only have a statistically but also economically significant impact on global equity markets. The economic significance of EME shocks is in particular underlined by their remarkably persistent effects over time. Importantly, EMEs are found to influence global equity markets about just as much in "good" times as in "bad" times, i.e. during crises or periods of financial turbulence. Finally, we detect a large degree of heterogeneity in the transmission of EME shocks to individual countries' equity markets, stressing the different degrees of financial exposure, which is relatively higher for European equity markets.

Keywords: global financial markets, equity markets, transmission, financial integration, shocks, news, emerging market economies, mature economics, euro area, United States

JEL Classification: F36, F30, G15

Suggested Citation

Cuadro Sáez, Lucía and Fratzscher, Marcel and Thimann, Christian, The Transmission of Emerging Market Shocks to Global Equity Markets (February 2007). ECB Working Paper No. 724. Available at SSRN: https://ssrn.com/abstract=963749

Lucía Cuadro Sáez

Banco de España ( email )

Madrid 28014
Spain

Marcel Fratzscher (Contact Author)

DIW Berlin ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Christian Thimann

AXA Group ( email )

25 avenue Matignon
Paris, 75008
France

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
125
PlumX Metrics