Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/203386 
Year of Publication: 
2018
Series/Report no.: 
ADB Economics Working Paper Series No. 546
Publisher: 
Asian Development Bank (ADB), Manila
Abstract: 
This paper investigates and tests the role of regional exposures in financial contagion from advanced to emerging market economies through the global banking network using data on cross-border bilateral bank claims and liability positions. We first examine whether an economy can become more susceptible to capital outflows, regardless of its own bank exposures, if economies in the same region are heavily exposed to crisis countries. Second, we test whether the same region lenders tend to reduce exposures to the emerging market borrowers less than do different region lenders during crises. Using bilateral data from the Bank for International Settlements international banking statistics, we obtain evidence for both hypotheses. First, we find that direct exposures of a country's own and the overall region's banking sectors to crisis-affected countries are systematically related to bank capital outflows during the global financial crisis. Also, some of our empirical results indicate that an emerging economy's financial vulnerability can be influenced by its region's indirect exposures to crisis countries. Second, a further analysis suggests more favorable behavior of the same region lender toward emerging economies during crisis.
Subjects: 
capital outflows
contagion
direct/indirect exposures
global financial crisis
regional
JEL: 
E44
F15
F21
F34
F38
F42
F62
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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