A Contagion through Exposure to Foreign Banks during the Global Financial Crisis

Publication | July 2017

This paper develops an empirical methodology to test the contagion effect at the country level using bilateral data on bank claims between countries.

Although the global financial crisis of 2008 took root in the advanced countries, its shocks spread through the emerging economies, reflecting the increasingly interconnected global financial system.

The paper measures the direct and indirect exposures of emerging economies to crisis countries and tests whether these matter for capital outflows from emerging economies. It measures these exposures to the crisis-affected countries by using bilateral foreign claims sourced from Bank for International Settlements (i) consolidated banking statistics foreign claims on immediate counterparty and ultimate risk bases and (ii) locational banking statistics cross-border total claims. Results indicate that emerging market economies that were more exposed to banks from crisis-affected countries recorded more capital outflows than other countries during the global financial crisis. 

Contents 

  • Data
  • Methodology
  • Empirical Findings
  • Conclusion

Additional Details

Authors
Type
Series
Subjects
  • Economics
  • Finance sector development
  • Banking and non-bank financial institutions
SKU
  • WPS178929-2
ISSN
  • ISSN 2313-6537 (Print)
  • 2313-6545 (e-ISSN)

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