Transmission of the U.S. Subprime Crisis to Emerging Markets: Evidence on the Decoupling-Recoupling Hypothesis
We find that emerging markets appeared to be somewhat insulated from developments in U.S. financial markets from early 2007 to summer 2008. From that point on, however, emerging markets responded very strongly to the deteriorating situation in the U.S. financial system and real economy. Policy measures taken in emerging markets to insulate themselves from global financial developments proved inadequate in the face of the credit crunch and decline in international trade that followed the Lehman bankruptcy in September 2008.
This paper was prepared for the JIMF/Warwick Conference on April 6, 2009. We thank Mahir Binici and Gurnain Pasricha for data collection and helpful comments from participants at the conference, especially Duncan Shand, Michael Melvin and Mark Taylor. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Dooley, Michael & Hutchison, Michael, 2009. "Transmission of the U.S. subprime crisis to emerging markets: Evidence on the decoupling-recoupling hypothesis," Journal of International Money and Finance, Elsevier, vol. 28(8), pages 1331-1349, December. citation courtesy of