IDEAS home Printed from https://ideas.repec.org/p/sea/wpaper/wp07.html
   My bibliography  Save this paper

The Global Financial Crisis and Transmission Channels: An International Network Analysis

Author

Listed:
  • Changmo Ahn
  • Gyemin Lee
  • Dongkoo Chang

Abstract

This paper analyzes the effects of the trade and financial networks on the propagation of the global financial crisis of 2008. We adopt a new methodology that incorporates a dynamic network approach into econometric analysis. Some interesting results are obtained. Firstly, both the trade and financial networks provide clear pictures of international economic linkages. Secondly, both the trade and financial networks do not have any significant effect on the growth rate of real GDP worldwide, but have a significant effect within particular country groups. The trade network especially, contributes a negative contagion impact on the Chiang Mai Initiative (CMI) and Latin economies while the financial network contributes a negative contagion effect on the Asia-Pacific and inflation targeting countries. Thirdly, the financial network, however, has a worldwide positive consequence on share price index. Finally, the real effective exchange rate overvaluation among the country-specific fundamentals has a significant negative impact on the real GDP growth rate and stock market performance.

Suggested Citation

  • Changmo Ahn & Gyemin Lee & Dongkoo Chang, 2014. "The Global Financial Crisis and Transmission Channels: An International Network Analysis," Working Papers wp07, South East Asian Central Banks (SEACEN) Research and Training Centre.
    • Handle: RePEc:sea:wpaper:wp07
    as

    Download full text from publisher

    File URL: https://www.seacen.org/publications/RePEc/702003-100349-PDF.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ricardo J. Caballero & Alp Simsek, 2009. "Complexity and Financial Panics," NBER Working Papers 14997, National Bureau of Economic Research, Inc.
    2. Onnela, J.-P. & Chakraborti, A. & Kaski, K. & Kertész, J., 2003. "Dynamic asset trees and Black Monday," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 247-252.
    3. Andrew K. Rose & Mark M. Spiegel, 2010. "Cross‐Country Causes And Consequences Of The 2008 Crisis: International Linkages And American Exposure," Pacific Economic Review, Wiley Blackwell, vol. 15(3), pages 340-363, August.
    4. Park, Cyn-Young, 2013. "Asian Capital Market Integration: Theory and Evidence," ADB Economics Working Paper Series 351, Asian Development Bank.
    5. Keskin, Mustafa & Deviren, Bayram & Kocakaplan, Yusuf, 2011. "Topology of the correlation networks among major currencies using hierarchical structure methods," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(4), pages 719-730.
    6. Berkmen, S. Pelin & Gelos, Gaston & Rennhack, Robert & Walsh, James P., 2012. "The global financial crisis: Explaining cross-country differences in the output impact," Journal of International Money and Finance, Elsevier, vol. 31(1), pages 42-59.
    7. Levy Yeyati, Eduardo & Williams, Tomas, 2012. "Emerging economies in the 2000s: Real decoupling and financial recoupling," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 2102-2126.
    8. Imbs, Jean, 2006. "The real effects of financial integration," Journal of International Economics, Elsevier, vol. 68(2), pages 296-324, March.
    9. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2009. "Financial Instability, Reserves, and Central Bank Swap Lines in the Panic of 2008," American Economic Review, American Economic Association, vol. 99(2), pages 480-486, May.
    10. Trancoso, Tiago, 2014. "Emerging markets in the global economic network: Real(ly) decoupling?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 395(C), pages 499-510.
    11. Naylor, Michael J. & Rose, Lawrence C. & Moyle, Brendan J., 2007. "Topology of foreign exchange markets using hierarchical structure methods," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 382(1), pages 199-208.
    12. Yung Chul Park & Kwanho Shin, 2009. "Economic Integration and Changes in the Business Cycle in East Asia: Is the Region Decoupling from the Rest of the World?-super-," Asian Economic Papers, MIT Press, vol. 8(1), pages 107-140, Winter.
    Full references (including those not matched with items on IDEAS)

    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. Trancoso, Tiago, 2014. "Emerging markets in the global economic network: Real(ly) decoupling?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 395(C), pages 499-510.
    2. Frankel, Jeffrey & Saravelos, George, 2012. "Can leading indicators assess country vulnerability? Evidence from the 2008–09 global financial crisis," Journal of International Economics, Elsevier, vol. 87(2), pages 216-231.
    3. Pierre-Olivier Gourinchas & Maurice Obstfeld, 2012. "Stories of the Twentieth Century for the Twenty-First," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(1), pages 226-265, January.
    4. Thorvardur Tjörvi Ólafsson & Thórarinn G. Pétursson, 2010. "Weathering the financial storm: The importance of fundamentals and flexibility," Economics Working Papers 2010-17, Department of Economics and Business Economics, Aarhus University.
    5. Jeffrey A. Frankel & George Saravelos, 2010. "Are Leading Indicators of Financial Crises Useful for Assessing Country Vulnerability? Evidence from the 2008-09 Global Crisis," NBER Working Papers 16047, National Bureau of Economic Research, Inc.
    6. Gautier Marti & Frank Nielsen & Miko{l}aj Bi'nkowski & Philippe Donnat, 2017. "A review of two decades of correlations, hierarchies, networks and clustering in financial markets," Papers 1703.00485, arXiv.org, revised Nov 2020.
    7. Bussière, Matthieu & Cheng, Gong & Chinn, Menzie D. & Lisack, Noëmie, 2015. "For a few dollars more: Reserves and growth in times of crises," Journal of International Money and Finance, Elsevier, vol. 52(C), pages 127-145.
    8. Bruce N. Lehmann & David M. Modest, 1985. "The Empirical Foundations of the Arbitrage Pricing Theory I: The Empirical Tests," NBER Working Papers 1725, National Bureau of Economic Research, Inc.
    9. Chen Ray-Bing & Chen Yi-Chi & Chu Chi-Hsiang & Lee Kuo-Jung, 2017. "On the determinants of the 2008 financial crisis: a Bayesian approach to the selection of groups and variables," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 21(5), pages 1-17, December.
    10. Chiţu, Livia, 2012. "Was unofficial dollarisation/euroisation an amplifier of the 'Great Recession' of 2007-09 in emerging economies," Working Paper Series 1473, European Central Bank.
    11. Davide Furceri & Mr. Jonathan David Ostry, 2021. "Initial Output Losses from the Covid-19 Pandemic: Robust Determinants," IMF Working Papers 2021/018, International Monetary Fund.
    12. Yao, Can-Zhong & Lin, Ji-Nan & Liu, Xiao-Feng, 2016. "A study of hierarchical structure on South China industrial electricity-consumption correlation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 444(C), pages 129-145.
    13. Livia Chitu, 2013. "Was Unofficial Dollarisation/Euroisation an Amplifier of the ‘Great Recession’ of 2007–2009 in Emerging Economies?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 55(2), pages 233-265, June.
    14. Kantar, Ersin & Keskin, Mustafa, 2013. "The relationships between electricity consumption and GDP in Asian countries, using hierarchical structure methods," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(22), pages 5678-5684.
    15. Jun, Doobae & Ahn, Changmo & Kim, Gwangil, 2017. "Analysis of the global financial crisis using statistical moments," Finance Research Letters, Elsevier, vol. 21(C), pages 47-52.
    16. Sandoval, Leonidas, 2012. "Pruning a minimum spanning tree," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(8), pages 2678-2711.
    17. Leonidas Sandoval Junior, 2011. "Pruning a Minimum Spanning Tree," Papers 1109.0642, arXiv.org.
    18. Kalemli-Ozcan, Sebnem & Papaioannou, Elias & Perri, Fabrizio, 2013. "Global banks and crisis transmission," Journal of International Economics, Elsevier, vol. 89(2), pages 495-510.
    19. Paulo Ferreira & Marcus Fernandes da Silva & Idaraí Santos de Santana, 2019. "Detrended Correlation Coefficients Between Exchange Rate (in Dollars) and Stock Markets in the World’s Largest Economies," Economies, MDPI, vol. 7(1), pages 1-11, February.
    20. Dufrénot, Gilles & Mignon, Valérie & Péguin-Feissolle, Anne, 2011. "The effects of the subprime crisis on the Latin American financial markets: An empirical assessment," Economic Modelling, Elsevier, vol. 28(5), pages 2342-2357, September.

    More about this item

    Keywords

    Global Financial Crisis; Transmission; Network Analysis; Trade Network; Financial Network;
    All these keywords.

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • G01 - Financial Economics - - General - - - Financial Crises

    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:sea:wpaper:wp07. 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: Azharin (email available below). General contact details of provider: https://edirc.repec.org/data/seacemy.html .

    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.