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

In this paper, I analyze how has the financial interdependence and contagion among LAC-6countries 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 link-ages. 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 between 40% and 49%),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.

• Autores: Pareja Restrepo, Laura
• Tipo de recurso: Work document
• Fecha de publicación: 2016
• Institución: Universidad de los Andes
• Repositorio: Séneca: repositorio Uniandes
• Idioma: eng
• OAI Identifier: oai:repositorio.uniandes.edu.co:1992/8628
• Acceso en línea: http://hdl.handle.net/1992/8628
• Palabra clave: Financial interdependence; Contagion; Financial stress; Real linkages; Financial linkages; Crisis financiera - Estados Unidos; Crisis financiera - América Latina; Interdependencia económica - América Latina; F30, F36, G15
• Rights: openAccess
• License: http://creativecommons.org/licenses/by-nc-nd/4.0/