(WP7/2014) The Global Financial Crisis and Transmission Channels: An International Network Analysis
This paper analyzes the effects of the trade and financial networks on the propagation of the global financial crisis of 2008. We adopt a new methodology that incorporates a dynamic network approach into econometric analysis. Some interesting results are obtained. Firstly, both the trade and financial networks provide clear pictures of international economic linkages. Secondly, both the trade and financial networks do not have any significant effect on the growth rate of real GDP worldwide, but have a significant effect within particular country groups. The trade network especially, contributes a negative contagion impact on the Chiang Mai Initiative (CMI) and Latin economies while the financial network contributes a negative contagion effect on the Asia-Pacific and inflation targeting countries. Thirdly, the financial network, however, has a worldwide positive consequence on share price index. Finally, the real effective exchange rate overvaluation among the country-specific fundamentals has a significant negative impact on the real GDP growth rate and stock market performance.
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