The current global financial crisis: Do Asian stock markets show contagion or interdependence effects?

In the framework of the current global economic crisis, a pertinent question is whether the world economies are suffering from contagion or interdependence effects. With its origins in the US sub-prime mortgage market crisis starting at the end of 2007, when a loss of confidence by investors in the value of securitized mortgages resulted in a liquidity crisis, hard-hitting the banking system and rapidly spreading into the financial markets, the effects of the crisis were automatically reflected in the rest of the world economies. These effects become more severe as the rest of the world is facing economic and financial instability. Therefore, the American shock can be seen as the trigger that revealed the other economies’ own financial problems. The main finding of this paper shows that the US stock markets are not generating contagious effects into the Asian stock markets. However, strong evidence of volatility transmission derived from these economies’ interlinkages has been detected.     

How does the US credit crisis affect the Asia–Pacific economies?—Analysis based on a general equilibrium model

The current financial crisis differs from most post-war recessions in that the balance sheets of both households and banks have been severely damaged, which could lead to structural changes in the behavior of households. Therefore, it may exert some far-reaching effects on regional economies in the short run as well as in the medium term. This paper studies these effects using a multi-country dynamic structural model. In the short run, the US credit crisis weighs heavily upon the Asia–Pacific economies through financial linkages in addition to the traditional trade channel due to the deepening global financial integration. The relative importance of various financial channels differs notably across economies. While stock market contagion is more important for advanced economies, flight to quality across borders plays a key role in less developed economies. From a medium-term perspective, changes in the US household behavior caused by the credit crisis can help correct global imbalances, but the effectiveness hinges largely upon how long US households can maintain a reasonably higher savings rate. In addition, although the declining American public savings rate may not exert material impacts on the global imbalances, it can darken regional growth prospects due to a potentially higher world real interest rate.     

Comparison of Bank Profitability in China and the USA

This paper examines and compares the profitability of banks in the USA and China. The USA has the largest market‐based banking system and the financial system of China is still bank‐based. Our analysis indicates that in terms of profitability, banks in China outperformed those in the USA during our study period (2008–2014). Real estate loans had an adverse effect on US bank profitability during the financial crisis and no effect after the crisis but consistently improved the profitability of Chinese banks. Interest margins have no effect on US bank profitability but a consistently positive effect on Chinese banks, confirming that China is a traditional bank‐based economy. Interbank loans have a positive and significant effect on Chinese bank profitability, while interbank domestic loans have a negative effect on US bank profitability. Finally, size had a positive effect on US banks after the financial crisis period, confirming the scale economies of large US banks, but a negative effect on Chinese banks, indicating diseconomies of scale.     

Why are currency crises contagious? A comparison of the Latin American Crisis of 1994–1995 and the Asian Crisis of 1997–1998

Why Are Currency Crises Contagious? A Comparison of the Latin American Crisis of 1994–1995 and the Asian Crisis of 1997–1998.—This paper analyzes three channels through which currency crises are transmitted between countries: contagion based on unsustainable economic fundamentals; contagion resulting from herding behaviour in financial markets; contagion induced by close trade integration. The presented model that links currency crises with these three types of contagion is employed to analyze the transmission of the Mexican crisis in 1994–1995 and the Thai crisis in 1997 to other emerging economies. The empirical results show that, first, the most important contagion channels were based on close financial and trade integration rather than on the weakness of macroeconomic fundamentals. Second, the vulnerability to capital flow reversals and weak financial sectors made countries particularly prone to a currency crisis, while external imbalances and currency misalignments were much less important. JEL no. F30, E60, E65, E44     

Unsustainable sovereign debt—is the Euro crisis only the tip of the iceberg?

As a direct effect of the financial crisis in 2008, public debt began to accumulate rapidly, eventually leading to the European sovereign debt crisis. However, the dramatic increase in government debt is not only happening in European countries. All major G7 countries are experiencing similar developments. What are the implications of this kind of massive deficit and debt policy for the long term stability of these economies? Are there limits in debt-ratios that qualitatively change policy options? While theory can easily illustrate these limits, where are these limits in real economies? This paper examines the relationship between sovereign debt dynamics and capital formation, and accounts for the effects of the 2008 financial crisis on debt sustainability for the four largest advanced economies. We contribute to the literature on fiscal sustainability by framing the problem in an OLG model with government debt, physical capital, endogenous interest rates, and exogenous growth. For the calibration exercise we extract data from the OECD for Germany as a stabilization anchor in Europe, the US, the UK, and Japan for almost two decades before the 2008 crisis. Except for intertemporal preferences, all parameters are drawn or directly derived from the OECD database, or endogenously determined within the model. The results of the calibration exercise are alarming for all four countries under consideration. We identify debt ceilings that indicate a sustainable and unsustainable regime. For 2011 all four economies are either close to, or have already passed the ceiling. The results call for a dramatic readjustment in budget policies for a consolidation period and long-term fiscal rules that make it possible to sustain sufficient capital intensity so that these economies can maintain their high income levels. Current conditions are already starting to restrict policy choices. However, the results also make it very clear that none of these economies would survive a second financial crisis such as the one in 2008.     

Transmission of Stock Prices and Volatility from the Influential Major Markets on the Emerging Market: A Case Study of the Korean Stock Market

Abstract

This study investigates how the 1997 crisis has changed the Korean market by focusing on price and volatility spillovers from the US, Chinese, and Japanese markets. Using the exponential general autoregressive conditional heteroskedastic (EGARCH) model, new information on stock prices originating in the US market was transmitted to the Korean market for all periods. The price spillover effect from the Japanese market to the Korean market became stronger from the crisis period. Asymmetry in the spillover effect on market volatility was more pronounced in the Korean market after the financial crisis.     

Testing contagion of the 1997–98 crisis in Asian stock markets with structural breaks and incubation periods

This study tests for the existence of financial contagion, using a method that allows an incubation period before contagion takes effect. We define contagion as an increase in cross-market linkages following shocks. With daily data on Asian stock markets during the 1997–98 crisis, we find significant upward shifts in the linkages between the Asian markets of both crisis and non-crisis countries. The upward shifts are maintained even after controlling for heteroskedasticity and common world and regional factors, providing strong evidence for financial contagion.     

European crises and the Asian economies

This paper analyses the impact of recent financial crises in Europe on the Asian economies. What is often abbreviated to GFC included three distinct crises: the 2007–2008 North Atlantic financial crisis, a 2008–2009 global economic crisis and public finance crises which became increasingly focussed on the eurozone in 2010–2012. Asia did not experience significant financial crises, and the open economies recovered relatively rapidly from the global economic crisis. The relative weight of Asian economies in the global economy, which had been increasing for several decades, grew even more rapidly in 2009–2011 as the economies of the USA and Europe faltered. This poses challenges for global economic governance, although there are constraints on Asia being a more assertive force. Problems in the eurozone hold lessons for Asia; the euro and the Schengenzone are positive responses to the emergence of increasingly complex supply chains. In a similar context, East Asia is moving hesitantly toward financial cooperation and adopting second-best approaches, such as de facto dollar pegs, to reducing bilateral exchange rate volatility.     

Dealing with the Contagion： China and India in the Aftermath of the Subprime Meltdown

What began as a downturn in the US housing sector in the summer of 2007 had mushroomed into a global financial crisis by September 2008： the most severe since the 1930s. Developing countries, including China and India, at first seemingly sheltered from the worst of the turmoil, have not been immune to the contagion＇s spillover effects. What are China and India＇s precise vulnerabilities, and what can each do to better insulate their economies from the vagaries of global financial marker turmoil？ Equally important, what long-term strategies must each country adopt to make their economies more resilient to global market downturns？     

国际金融危机-资本主义末日抑或重塑

自大萧条以来本场国际金融危机是我们这年代经历的最大经济危机。这场危机导致大型金融机构倒闭,这些机构倒闭导致了世界经济系统的瘫塌。为了应对危机,很多国家注入数亿计的资金来刺激经济,而且通过控制私有公司来改造它们,我们实现了所谓"国有化"。政府提出的干预主义目的是通过社会主义方针政策调控处理危机。自2008年来工业化及新兴国家同意建立G20作为应对金融危机的主要策略。     

East Asian equity markets,financial crises,and the Japanese currency

The paper studies the interactions between the US and four East Asian equity markets. The focus is on the change in the information structure/flow between these markets triggered by the 1997 Asian financial crisis. It is shown that the information structure during the crisis period is different from that in the non-crisis periods. While the US market leads the four East Asian markets before, during, and after the crisis, it is Granger-caused by these markets during the financial crisis period but not in the post-crisis sample. Further, in accordance with concerns reported in the market, the Japanese currency is found to affect these equity markets during the crisis period. The Japanese yen effect, however, disappears in the post-crisis sample. The Japanese currency effect is quite robust as it is found from both local currency and US dollar return data and in the presence of Japanese stock returns. J. Japanese Int. Economies 21 (1) (2007) 138–152.     

Is the COVID-19 pandemic more contagious for the Asian stock markets? A comparison with the Asian financial,the US subprime and the Eurozone debt crisis

The ongoing COVID-19 pandemic has sent shock waves across the global stock markets. Several financial crises in the past too have had a global impact with their reach extending beyond the country of origin. The current study compares the contagion effect of four such crises viz. the Asian financial crisis, the US subprime crisis, the Eurozone debt crisis, and the currently ongoing Covid-19 crisis on Asian stock markets to understand which of these has had the most severe impact. It finds that among all the four crises, the US subprime crisis has been the most contagious for the Asian stock markets. The study also highlights the difference between severities of a liquidity crisis versus a real crisis and identifies the markets that remained insulated from all these crises, a finding which will be useful for portfolio managers in devising their asset allocation.     

金融危机、宏观经济因素与中美股市联动

伴随中国经济及金融的逐步开放,中美股市不仅出现了显著的联动,而且在2008年金融危机期间这种联动还显著增强。现有研究分析了中美股市的联动及其相依结构,但几乎没有涉及联动及危机期间联动增强的原因。本文通过在(DCC)GARCH模型中引入宏观经济变量,同时允许股票市场对宏观经济因素的响应时变,分析了中美股市联动及危机期间联动增强的原因。研究结果显示,美国冲击的跨国传导和传染是中美股市联动的主要动因,危机期间的净传染是中美股市联动增强的一个原因,但解释力不强,理性传染是危机期间中美股市联动增强的主因,在引起理性传染的宏观经济因素中,美国货币政策冲击的结构性突变最为重要。     

What Have We Learned from the 2007-08 Financial Crisis? Papers Presented at the Second International Workshop on Financial Markets and Nonlinear Dynamics (Paris,June 4-5, 2015)

This note introduces eight studies presented at the second International Workshop on Financial Markets and Nonlinear Dynamics (FMND), organized in Paris on June 4–5, 2015 (www.fmnd.fr). These studies focus, first, on the main effects of the recent financial crisis of 2008–2009. Second, they discuss consequences of the global economic downturn of 2008–09. To do this, the authors focus on the main effects on real economies and financial systems of the financial crisis and then sum up the key reforms, recommendations and new rules and challenges that emerged from the crisis. For each paper under consideration, the economic theory and/or hypothesis suggested is illustrated through an empirical investigation.     

社会学视野中的2008世界金融危机

2008年,由美国次贷危机引发的金融危机暴风骤雨般席卷全球,对世界主要经济体造成了巨大的冲击。虽然经济学家认为,这是一个经济问题,是由于金融监管不力和金融产品本身缺陷造成的。然而文章却认为：此次危机是世界经济功能失衡的结果;是世界经济体之间冲突、各经济部门之间及社会冲突的结果;是美国超前消费文化长期积累的结果。     

全球金融危机与欧洲经济的困境

论文探讨了全球金融危机对欧洲的冲击与影响,认为美国次贷危机所引发的全球金融危机对欧洲经济带来的衰退比美国更甚。论文从欧洲经济长期存在的矛盾在危机中集中爆发以及欧盟在国际金融体系中缺乏远见卓识两大方面分析了其中的原因。论文还对欧盟经济的复苏前景及未来经济增长的出路作了分析预测,认为如果欧盟不能在创新以及以更开放的心态来对待发展中国家的崛起上作出努力和调整,欧盟中长期经济发展的前景不容乐观。     

The dynamic contagion of the global financial crisis into Japanese markets

This paper investigates the risk contagion channel of the global financial crisis into Japan using daily data on bond risk premiums for the financial and manufacturing industries from July 18, 2006 to May 25, 2010. We employ a bivariate EGARCH model with the constant exogenous contagion impacts of foreign industries and the time-varying endogenous contagion impacts of domestic industries. We find evidence that: (i) a constant exogenous impact from foreign industries appears in the risk premium for 5-year bonds issued by manufacturing industry firms, and (ii) contagion only exists from the manufacturing industry to the financial industry, and that there is no evidence of any reverse causation, even during the Lehman Brothers shock on September 15, 2008. Thus, in Japan, risk transfers from foreign industries to the domestic manufacturing industry, and thence to the domestic financial industry.     

国际资本形成对我国经济产生的风险及对策

20世纪美国等发达国家进一步在全世界倡导金融自由化政策，新兴市场国家的金融自由化及信息技术的广泛应用使得国际资本以更大规模、更快速度在国际金融市场上自由流动，并对新兴市场经济体产生了深远影响。但是90年代后期，墨西哥、泰国、韩国、马来西亚、巴西等新兴市场经济体相继发生了金融危机，甚至引发犬规模的经济动荡，使得经济界重新审视、思考国际资本流动的影响。我国近几年成为国际资本流入的大国，那么国际资本形成在促进我国经济增长的同时，会给我们带来哪些方面的风险呢？文章重点分析了国际资本形成中所产生的风险，并提出防范风险的对策建议。     

基于随机前沿分析法的中国沿海区域经济效率评价

中国经济发展速度举世瞩目,而发展效率一直为人们所诟病.文章以东南沿海四省一市为研究样本,运用随机前沿分析法对经济效率及其影响因素进行实证分析.研究结果表明,广东省的技术效率在绝大多数年份都高于沿海其他省市,直至2008年金融危机,长三角的平均技术效率值呈上升趋势并超过广东.文章认为这主要源于第三产业自身技术效率递减以及FDI是一种次优的制度安排,对本土企业具有挤出效应.     

金融危机传染的信用路径

从信用理论来看,金融危机传染的内在路径,就是其传染的信用路径。通过分析发现,金融危机传染的信用路径共有四种:信用主体双向性传染、信用关系性传染、信用心欲性传染、信用信息性传染。一个国家受到他国传染而爆发金融危机往往是四种信用路径的传染同时作用的结果。