Abstract
Although the global financial crisis of 2008 took root in advanced economies, its shocks spread through emerging economies, reflecting the increasingly interconnected global financial system. In this paper, we test the contagion effect at the country level using bilateral data on bank claims between countries. Direct and indirect exposures of emerging economies to crisis countries are empirically measured by using bilateral foreign claims from the Bank for International Settlements, and whether these exposures matter for capital outflows from emerging economies is tested. The findings show that emerging market economies more exposed to banks in the crisis-affected countries, both directly and/or indirectly, suffered more capital outflows during the global financial crisis. We also find that an emerging economy's financial vulnerability can be influenced by its region's overall exposure to crisis countries, indicating contagion effects at the regional level. Evidence also suggests that same-region lenders exhibited more favorable behavior toward the regional borrowers during the crisis, with important policy implications.
| Original language | English |
|---|---|
| Article number | 100721 |
| Journal | Journal of Financial Stability |
| Volume | 46 |
| DOIs | |
| Publication status | Published - 2020 Feb |
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Keywords
- Capital outflows
- Contagion
- Direct/indirect exposures
- Global financial crisis
- Interconnectedness
ASJC Scopus subject areas
- Finance
- Economics, Econometrics and Finance(all)
Cite this
Contagion through National and Regional Exposures to Foreign Banks during the Global Financial Crisis. / Park, Cyn Young; Shin, Kwanho.
In: Journal of Financial Stability, Vol. 46, 100721, 02.2020.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Contagion through National and Regional Exposures to Foreign Banks during the Global Financial Crisis
AU - Park, Cyn Young
AU - Shin, Kwanho
PY - 2020/2
Y1 - 2020/2
N2 - Although the global financial crisis of 2008 took root in advanced economies, its shocks spread through emerging economies, reflecting the increasingly interconnected global financial system. In this paper, we test the contagion effect at the country level using bilateral data on bank claims between countries. Direct and indirect exposures of emerging economies to crisis countries are empirically measured by using bilateral foreign claims from the Bank for International Settlements, and whether these exposures matter for capital outflows from emerging economies is tested. The findings show that emerging market economies more exposed to banks in the crisis-affected countries, both directly and/or indirectly, suffered more capital outflows during the global financial crisis. We also find that an emerging economy's financial vulnerability can be influenced by its region's overall exposure to crisis countries, indicating contagion effects at the regional level. Evidence also suggests that same-region lenders exhibited more favorable behavior toward the regional borrowers during the crisis, with important policy implications.
AB - Although the global financial crisis of 2008 took root in advanced economies, its shocks spread through emerging economies, reflecting the increasingly interconnected global financial system. In this paper, we test the contagion effect at the country level using bilateral data on bank claims between countries. Direct and indirect exposures of emerging economies to crisis countries are empirically measured by using bilateral foreign claims from the Bank for International Settlements, and whether these exposures matter for capital outflows from emerging economies is tested. The findings show that emerging market economies more exposed to banks in the crisis-affected countries, both directly and/or indirectly, suffered more capital outflows during the global financial crisis. We also find that an emerging economy's financial vulnerability can be influenced by its region's overall exposure to crisis countries, indicating contagion effects at the regional level. Evidence also suggests that same-region lenders exhibited more favorable behavior toward the regional borrowers during the crisis, with important policy implications.
KW - Capital outflows
KW - Contagion
KW - Direct/indirect exposures
KW - Global financial crisis
KW - Interconnectedness
UR - http://www.scopus.com/inward/record.url?scp=85077332596&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85077332596&partnerID=8YFLogxK
U2 - 10.1016/j.jfs.2019.100721
DO - 10.1016/j.jfs.2019.100721
M3 - Article
AN - SCOPUS:85077332596
VL - 46
JO - Journal of Financial Stability
JF - Journal of Financial Stability
SN - 1572-3089
M1 - 100721
ER -