Financial Linkages Between the U.S. and Latin Amercia: Evidence from Daily Data
International Monetary Fund, Nov 1, 2007 - Capital market - 35 pages
Motivated by recent bursts of global financial market turbulence, this paper investigates the linkages between the financial markets in the United States and those of the seven largest Latin American economies, focusing on the impact of shocks originating in the U.S. stock, bond, and currency markets. After documenting that cross-country linkages were different in "tranquil" and "turbulent" times within our sample, we find that: (i) for stock markets, recent episodes of market turbulence stood out from preceding ones as they showed an increased sensitivity of Latin American markets to U.S. shocks, reversing a trend of weakening linkages; (ii) currency markets in Latin America exhibited a decrease in cross-market linkages with the U.S. during the last episodes of volatility, consistent with increased exchange rate flexibility in the region; and (iii) the external bond markets in Latin America remained on a trend of weakening linkages with U.S. corporate bonds, while they increased their sensitivity to movements in other emerging market bond markets.
24 pages matching turbulent and tranquil in this book
Results 1-3 of 24
What people are saying - Write a review
We haven't found any reviews in the usual places.
Identifying Tranquil vs Turbulent Times
12 other sections not shown
adjusted correlations Appendix for data Argentina asset markets average bond markets Brazil Chile CHL COL MEX Colombia contagion corporate spread basis correlation coefficient currency markets daily changes daily percentage change data sources dependent variable Descriptive Statistics due to U.S. emerging market spreads episodes of market error variance due estimated euro explained by U.S. financial linkages financial markets Forbes-Rigobon 2002 forecast error variance impulse response functions J.P.Morgan last episode Latin American countries Latin American exchange Latin American markets Latin American stock market turbulence markets in Latin Non-Latin emerging market Panel sample sensitivity of Latin share of forecast shocks in tranquil shocks in turbulent sources and definitions sovereign bond sovereign spreads Standard Deviation stock market volatility stock prices Stock Returns tranquil and turbulent turbulent and tranquil turbulent episodes turbulent periods U.S. and Latin U.S. corporate bond U.S. corporate spreads U.S. dollar U.S. exchange rate U.S. shocks U.S. stock market unadjusted United variance decomposition Venezuela