Conference Paper
Emerging Markets Currency Interconnectedness in the aftermath of the Great Recession
Date
March, 2021
Topic
G1. General Financial Markets
F3. International Finance
Since international investors constantly reshuffle their portfolios in response to changing conditions, interactions among world economies are natural, which could potentially allow the spread of risks across countries. This is an example of the so-called contagion effect of financial/economic crises spread through spillover effects. In particular, five emerging market economies known as Fragile Five (Brazil, India, Indonesia, South Africa and Turkey) present an interesting case study for the contagion effects in exchange rates markets. Issue is exacerbated especially in the aftermath of the Great Recession of 2008. Cognizant about international connectivity is also crucial in designing efficient monetary policies for decision makers. In this paper, we analyze the connectedness among these countries via Diebold-Yilmaz method. We find that Interconnectedness is not high among the currencies; the biggest contributor is still the “own” effects for all currencies.
Authors
Ismail H. Genc
Professor of Economics, Department of Economics, American...