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- Title
Asia's financial interconnectedness: Evolution, implications, and insights from past crises.
- Authors
Rosenkranz, Peter; Melchor, Monica
- Abstract
Past crisis episodes have illustrated the interplay of macroeconomic and financial conditions, including the presence of harmful macrofinancial feedback effects. Meanwhile, financial markets have become increasingly connected and economic and financial cycles more synchronized over time. Against the backdrop of past financial crises and the ongoing COVID-19 pandemic, we document and analyze trends in Asia's financial interconnectedness over the past 3 decades, as well as its possible role in predicting financial crises. Employing a vector-autoregressive model and a panel probit regression, we find that financial interconnectedness increased across Asia and the Pacific, being particularly pronounced during past crises, including the present COVID-19 pandemic. We also find that increased interconnectedness is strongly and positively associated with the probability of crisis onset.
- Subjects
ASIA; COVID-19 pandemic; BUSINESS cycles; VECTOR autoregression model; FINANCIAL crises; FINANCIAL markets
- Publication
Economic Analysis & Policy, 2022, Vol 76, p685
- ISSN
0313-5926
- Publication type
Article
- DOI
10.1016/j.eap.2022.08.024