Developing Countries' Financial Vulnerability to the Euro Crisis: An Event Study of Equity and Bond Markets

35 Pages Posted: 4 May 2012 Last revised: 6 Apr 2023

See all articles by Joshua Aizenman

Joshua Aizenman

University of Southern California - Department of Economics

Yothin Jinjarak

Victoria University of Wellington - Te Herenga Waka - School of Economics & Finance

Minsoo Lee

Asian Development Bank

Donghyun Park

Asian Development Bank - Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: May 2012

Abstract

The global crisis highlights the continued vulnerability of developing countries to shocks from advanced economies. Just a few years after the global crisis, the eurozone sovereign debt crisis has emerged as the single biggest threat to the global outlook. In this paper, we apply the event study methodology to gauge the scope for financial contagion from the EU to developing countries. More specifically, we estimate the responsiveness of equity and bond markets in developing countries to global crisis news and euro crisis news. Overall, we find that whereas global crisis news had a consistently negative effect on returns of equity and bond markets in developing countries, the effect of euro crisis news was more mixed and limited.

Suggested Citation

Aizenman, Joshua and Jinjarak, Yothin and Lee, Minsoo and Park, Donghyun, Developing Countries' Financial Vulnerability to the Euro Crisis: An Event Study of Equity and Bond Markets (May 2012). NBER Working Paper No. w18028, Available at SSRN: https://ssrn.com/abstract=2050820

Joshua Aizenman (Contact Author)

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall 300
Los Angeles, CA 90089
United States

Yothin Jinjarak

Victoria University of Wellington - Te Herenga Waka - School of Economics & Finance ( email )

P.O. Box 600
Wellington 6001
New Zealand

Minsoo Lee

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Donghyun Park

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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