NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Center and the Periphery: The Globalization of Financial Turmoil

Graciela L. Kaminsky, Carmen Reinhart

NBER Working Paper No. 9479
Issued in February 2003
NBER Program(s):   IFM

This paper studies how financial turbulence in emerging market countries can spread across borders. We construct indices of financial globalization' and evaluate the repercussions of turmoil in three emerging markets, which experienced financial crises in the late 1990s: Brazil, Russia, and Thailand. Our findings indicate that financial turbulence in these countries only spreads globally when they affect asset markets in one or more of the world's financial centers. Otherwise, spillovers are confined to countries in the same region. We also find that fragility in institutions in the financial centers is at the core of global spillovers while economic and monetary policy news contributes to regional spillovers.

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Document Object Identifier (DOI): 10.3386/w9479

Published: Carmen M. Reinhart, Carlos A. VĂ©gh and Andres Velasco (eds.), Money, Crises, and Transition: Essays in Honor of Guillermo Calvo. Cambridge, MA: The MIT Press, 2008.

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