Macroeconomic Fundamentals, Price Discovery and Volatility Dynamics in Emerging Markets
Jochen R. Andritzky, International Monetary Fund, Andreas Jobst, Sylwia Barbara Nowak, Natalia T. Tamirisa
International Monetary Fund, 2009 - Bonds - 30 pages
The recent global financial turmoil raised questions about the stability of foreign banks' financing to emerging market countries. While foreign banks' lending growth to most emerging market regions contracted sharply, lending to Latin America and the Caribbean (LAC) was significantly more resilient. Analyzing detailed BIS data on global banks' lending to LAC countries-whether extended directly by their headquarters abroad or by their local affiliates in host countries-we show that the propagation of the global credit crunch was significantly more muted in countries where most of foreign banks' lending was channeled in domestic currency. We also show that foreign banks' involvement in LAC has differed in fundamental ways from that in other regions, with most of their lending to LAC conducted by their local subsidiaries, denominated in domestic currency and funded from a domestic deposit base. These characteristics help explain why LAC has not been struck as hard as other emerging markets by the global deleveraging and pullback in foreign banks' lending.
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10-minute returns 10-year U.S. treasury Andersen autocorrelation average Bloomberg Bollerslev Brazil Mexico Russia Brazilian change in volatility coefficients ContFff Toteff ContFff core inflation cubic spline data releases Data sources effects emerging bond markets emerging market bonds emerging market debt emerging market external February 20 financial crisis foreign exchange markets heteroskedasticity impact information asymmetries interest rate intradaily and weekly intraday volatility investors kurtosis liquidity log-return long memory volatility macroeconomic announcements macroeconomic fundamentals market external bonds market microstructure market reaction mature markets Mexico Russia Turkey minutes negative percentage change prices and volatility quantile real activity Response turne retail sales Return Volatility returns and volatility Russia Turkey U.S. Sample period ſº sovereign bonds standard errors subprime crisis ten-year Treasury note Toteff ContFff Toteff trade balance Tullett Prebon U.S. dollar U.S. macroeconomic U.S. ten-year Treasury U.S. treasury note volatility dynamics volatility equations volatility response