Financial Linkages Between the U.S. and Latin America: Evidence from Daily Data

November 1, 2007

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Srideep D Ganguly, and Roberto Benelli. Financial Linkages Between the U.S. and Latin America: Evidence from Daily Data, (USA: International Monetary Fund, 2007) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Motivated by recent bursts of global financial market turbulence, this paper investigates the linkages between the financial markets in the United States and those of the seven largest Latin American economies, focusing on the impact of shocks originating in the U.S. stock, bond, and currency markets. After documenting that cross-country linkages were different in "tranquil" and "turbulent" times within our sample, we find that: (i) for stock markets, recent episodes of market turbulence stood out from preceding ones as they showed an increased sensitivity of Latin American markets to U.S. shocks, reversing a trend of weakening linkages; (ii) currency markets in Latin America exhibited a decrease in cross-market linkages with the U.S. during the last episodes of volatility, consistent with increased exchange rate flexibility in the region; and (iii) the external bond markets in Latin America remained on a trend of weakening linkages with U.S. corporate bonds, while they increased their sensitivity to movements in other emerging market bond markets.

Subject: Currency markets, Emerging and frontier financial markets, Exchange rates, Securities markets, Stock markets

Keywords: Currency market, Market turbulence, Market volatility, Sovereign bond, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2007/262
Stock No:

WPIEA2007262
ISBN:

9781451868258
ISSN:

1018-5941

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