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Impact of financial stress in advanced and emerging economies

Author

Listed:
  • Flavio César Valerio Roncagliolo
  • Ricardo Norberto Villamonte Blas

Abstract

Purpose - The purpose of the paper is to examine the differences in the impact of financial stress in advanced and emerging economies. Design/methodology/approach - The authors employ a panel vector autoregression model (PVAR) for a comparative analysis of the relationship between financial stress, economic growth and monetary stability in 14 advanced and emerging economies. A homogeneous measure of financial stress is constructed and measured as an index that provides signals of stress episodes in an economy. Findings - The impact of financial stress shocks is greater on the economic growth of advanced economies; likewise, financial stress shocks are significant only in advanced economies. The interbank interest rate is negatively affected by financial stress in emerging economies. In general, the results show a clear view of the importance of financial stability and the economic relevance of financial stress measures in the context of macro-prudential regulation. Originality/value - The results can be extended to monetary policy to implement measures that mitigate the impact of future financial crises.

Suggested Citation

  • Flavio César Valerio Roncagliolo & Ricardo Norberto Villamonte Blas, 2022. "Impact of financial stress in advanced and emerging economies," Journal of Economics, Finance and Administrative Science, Emerald Group Publishing Limited, vol. 27(53), pages 68-85, March.
    • Handle: RePEc:eme:jefasp:jefas-05-2021-0063
    DOI: 10.1108/JEFAS-05-2021-0063
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