Financial Interdependence and Contagion: the transmission of financial stress from the United States to Latin America

Laura Pareja Restrepo ()

No 14235, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: In this paper I analyze how has the financial interdependence and contagion among LAC-6 countries and the United States changed in the last 15 years, and the transmission channels of these cross-market linkages. To do so, I use a two-stage approach in which I first estimate financial interdependence and contagion as transmission coefficients of financial stress indexes in a rolling window auto-regressive model, and then assess the channels that explain these linkages. Results show that, in average, around 34% of the financial stress in the United States has been transmitted to LAC-6 countries over the last 15 years. However, this financial interdependence is much larger with Chile, Colombia, Mexico, and Peru (ranges around 45%) and a significant increase in the transmission of stress is observed during the 2008 crisis. Both trade and financial linkages have a significant impact in the transmission of financial stress. Nonetheless, the effect of trade linkages is always larger than the one of the financial linkages, pointing to this mechanism as the main channel of financial interdependence and contagion between LAC-6 countries and the United States during the last 15 years.

Keywords: financial interdependence; contagion; financial stress; real linkages; financial linkages (search for similar items in EconPapers)
JEL-codes: F30 F36 G15 (search for similar items in EconPapers)
Pages: 34
Date: 2016-01-19
References: Add references at CitEc
Citations:

Downloads: (external link)
https://repositorio.uniandes.edu.co/bitstream/handle/1992/8628/dcede2016-07.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:col:000089:014235

Access Statistics for this paper

More papers in Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE Contact information at EDIRC.
Bibliographic data for series maintained by Universidad De Los Andes-Cede ().