The Transmission of Financial Stress from Advanced to Emerging Economies

By Ravin Balakrishnan, S. Danninger, Selim Elekdag, Irina Tytell. Social Science Research Network, 2009

470 citations recorded by the source corpus.

This paper studies how financial stress, defined as periods of impaired financial intermediation, is transmitted from advanced to emerging economies using a new financial stress index for emerging economies. Previous financial crises in advanced economies passed through strongly and rapidly to emerging economies. The unprecedented spike in financial stress in advanced economies elevated stress across emerging economies above levels seen during the Asian crisis but with significant cross-country variation. The extent of pass-through of financial stress is related to the depth of financial linkages between advanced and emerging economies. Higher current account and fiscal balances do little to insulate emerging economies from the transmission of acute financial stress in advanced economies, although they may still help dampen the impact on the real economy.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/2d9f95208013573ec64893c7cff67f307073d9fd

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Citations in the corpus

The real effects of financial stress in the Eurozone (2013, methodology): “A financial shock is designed here as an innovation in the Financial Stress Index (ECB, 2009; IMF, 2008, 2009), which we build using country-level information on financial stress conditions following the work of Cardarelli et al. (2009).”
Fiscal developments and financial stress: a threshold VAR analysis (2017, unknown): “2011, substantially revised by Balakrishnan et al. 2009). The FSI contains three main components: (i) Bank-related stress: beta of banking sector showing the perception of risk of the banking sector compared to other sectors in the economy, the TED spread (difference between the short-term interbank”
A new index of financial conditions (2014, unknown): “We call the full model described in equations (1) and (2) the TVP-FAVAR.”
Global Waves of Debt: Causes and Consequences (2021, background): “The ECA region in particular was a major recipient of these bank flows (Balakrishnan et al. 2011; Takáts 2010).”
Disentangling diverse measures: a survey of financial stress indexes (2012, methodology): “To aggregate indicators (or subindexes), authors use equal weights (Danninger et al., 2009; Lo Duca and Peltonen, 2011; Hansen, 2006; Sandhal et al., 2011; Yiu, Ho, and Jin, 2010; Hanschel and Monnin, 2005), credit weights (Illing and Liu, 2006), or regression-based methods (Grimaldi, 2010, 2011; Lo”
Determinants of Financial Stress in Emerging Market Economies (2014, unknown): “As pointed out by Balakrishnan et al. (2011) and Illing and Liu (2006), the use of binary variable for crisis occurrence and dating does not provide a measure of intensity of crisis and near-miss events.(3) However, some studies used a sector-specific index to measure sector-specific intensity of cr”
Assessing systemic risks and predicting systemic events (2013, background): “The IMF (2008, 2009) presented the work by Cardarelli et al. (2011) and Balakrishnan et al. (2009), who constructed financial stress indices for a broad set of advanced and emerging economies.”
Dynamics of international spillovers and interaction: Evidence from financial market stress and economic policy uncertainty (2018, background): “Balakrishnan et al. (2011) develop a financial stress index for developing countries and examine the transmission channels of financial stress between advanced and developing economies.”