IDEAS home Printed from https://ideas.repec.org/a/bap/journl/170301.html
   My bibliography  Save this article

Measuring the Cost of Financial Integration in the GCC: Lessons from the Global Crisis

Author

Listed:
  • Mahmoud Haddad

    (College of Business and Global Affairs, The University of Tennessee at Martin, 214 Business Administration, U.S.A.)

  • Sam Hakim

    (Corporate Risk, Fidelity Investments, Boston, U.S.A.)

Abstract

In the wake of the global financial crisis, several leading countries of the Gulf Cooperation Council (GCC) experienced considerable economic slowdown. Equity prices tumbled, bank credit dried up, GDP growth rates came to a halt, spreads on sovereign bonds soared, and risk aversion increased dramatically. These events have demonstrated the negative consequences of financial integration which combined with financial innovation and deregulation have increased vulnerabilities in the GCC and created heightened systemic risks. Using data between 2001 and 2009, we calculate a measure of financial stress for GCC countries and estimate the harm caused by the financia l cris is to the region¡¯s real economy. Our results show that between 2008 and 2009, economic activity in the GCC slowed by 2.6% after controlling for a variety of factors such as oil and stock price movements. We discuss how policymakers can initiate countercyclical policies to stave off the damage from future financial crisis.

Suggested Citation

  • Mahmoud Haddad & Sam Hakim, 2017. "Measuring the Cost of Financial Integration in the GCC: Lessons from the Global Crisis," Review of Economics & Finance, Better Advances Press, Canada, vol. 9, pages 1-12, August.
    • Handle: RePEc:bap:journl:170301
    as

    Download full text from publisher

    File URL: http://www.bapress.ca/ref/ref-article/1923-7529-2017-03-01-12.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. M Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 8-62, April.
    2. Kaminsky, Graciela L. & Reinhart, Carmen M., 2002. "Financial markets in times of stress," Journal of Development Economics, Elsevier, vol. 69(2), pages 451-470, December.
    3. John Beirne & Guglielmo Maria Caporale & Marianne Schulze-Ghattas & Nicola Spagnolo, 2013. "Volatility Spillovers and Contagion from Mature to Emerging Stock Markets," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 1060-1075, November.
    4. Kristin J. Forbes & Menzie D. Chinn, 2004. "A Decomposition of Global Linkages in Financial Markets Over Time," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 705-722, August.
    5. Mr. Subir Lall & Mr. Roberto Cardarelli & Mr. Selim A Elekdag, 2009. "Financial Stress, Downturns, and Recoveries," IMF Working Papers 2009/100, International Monetary Fund.
    6. Mr. Stephan Danninger & Ms. Irina Tytell & Mr. Ravi Balakrishnan & Mr. Selim A Elekdag, 2009. "The Transmission of Financial Stress from Advanced to Emerging Economies," IMF Working Papers 2009/133, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ahmad AlHarbi & Wafa Sbeiti & Moid Ahmad, 2024. "Money Supply, Banking and Economic Growth: A Cross Country Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 14(2), pages 234-242, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mahmoud Haddad & Sam Hakim, 2011. "Measuring the Damage from Financial Integration in the GCC: Lessons from the Global Crisis," Working Papers 614, Economic Research Forum, revised 08 Jan 2011.
    2. Neaime, Simon, 2016. "Financial crises and contagion vulnerability of MENA stock markets," Emerging Markets Review, Elsevier, vol. 27(C), pages 14-35.
    3. Ravi Balakrishnan & Stephan Danninger & Selim Elekdag & Irina Tytell, 2011. "The Transmission of Financial Stress from Advanced to Emerging Economies," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(0), pages 40-68, May.
    4. Morris Goldstein & Daniel Xie, 2009. "The impact of the financial crisis on emerging Asia," Proceedings, Federal Reserve Bank of San Francisco, issue Oct, pages 27-80.
    5. Jeffrey A. Frankel, 2010. "Monetary Policy in Emerging Markets: A Survey," NBER Working Papers 16125, National Bureau of Economic Research, Inc.
    6. Apostolakis, George & Papadopoulos, Athanasios P., 2014. "Financial stress spillovers in advanced economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 128-149.
    7. Mansour-Ichrakieh, Layal, 2020. "The impact of Israeli Geopolitical Risks on the Lebanese Financial Market: A Destabilizer Multiplier," MPRA Paper 99376, University Library of Munich, Germany.
    8. Kamila Tomczak, 2023. "Transmission of the 2007–2008 financial crisis in advanced countries of the European Union," Bulletin of Economic Research, Wiley Blackwell, vol. 75(1), pages 40-64, January.
    9. Amira El-Shal, 2012. "The Spillover Effects of the Global Financial Crisis on Economic Activity in Emerging Economies – Investigating the Egyptian Case Using the Financial Stress Index," Working Papers 737, Economic Research Forum, revised 2012.
    10. Apostolakis, George & Papadopoulos, Athanasios P., 2015. "Financial stress spillovers across the banking, securities and foreign exchange markets," Journal of Financial Stability, Elsevier, vol. 19(C), pages 1-21.
    11. Mr. Stephan Danninger & Ms. Irina Tytell & Mr. Ravi Balakrishnan & Mr. Selim A Elekdag, 2009. "The Transmission of Financial Stress from Advanced to Emerging Economies," IMF Working Papers 2009/133, International Monetary Fund.
    12. Frankel, Jeffrey, 2010. "Monetary Policy in Emerging Markets," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 25, pages 1439-1520, Elsevier.
    13. Barry Eichengreen, 2009. "The financial crisis and global policy reforms," Proceedings, Federal Reserve Bank of San Francisco, issue Oct, pages 299-334.
    14. Laura Pareja Restrepo, 2016. "Financial Interdependence and Contagion: the transmission of financial stress from the United States to Latin America," Documentos CEDE 14235, Universidad de los Andes, Facultad de Economía, CEDE.
    15. Asgharian, Hossein & Hess, Wolfgang & Liu, Lu, 2013. "A spatial analysis of international stock market linkages," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4738-4754.
    16. Amira Dridi & Mohamed El Ghourabi & Mohamed Limam, 2012. "On monitoring financial stress index with extreme value theory," Quantitative Finance, Taylor & Francis Journals, vol. 12(3), pages 329-339, March.
    17. Proaño, Christian R. & Schoder, Christian & Semmler, Willi, 2014. "Financial stress, sovereign debt and economic activity in industrialized countries: Evidence from dynamic threshold regressions," Journal of International Money and Finance, Elsevier, vol. 45(C), pages 17-37.
    18. Selim Elekdag & Ibrahim Burak Kanli & Zahid Samancioglu & Cagri Sarikaya, 2010. "Finansal Stres ve Iktisadi Faaliyet," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 10(2), pages 1-8.
    19. Galin Todorov & Prasad Bidarkota, 2013. "On international financial spillovers to frontier markets," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 5(4), pages 433-452.
    20. Bank for International Settlements, 2008. "Why is there so little regional financial integration in Asia?," BIS Papers chapters, in: Bank for International Settlements (ed.), Regional financial integration in Asia: present and future, volume 42, pages 38-61, Bank for International Settlements.

    More about this item

    Keywords

    Financial stress; Financial crisis; Contagion effect; Financial integration;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bap:journl:170301. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Carlson (email available below). General contact details of provider: http://www.bapress.ca .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.