{"title":"Global Financial Risk, Equity Returns and Economic Activity in Emerging Countries","authors":"Jaroslav Horvath, Guanyi Yang","doi":"10.1111/obes.12595","DOIUrl":null,"url":null,"abstract":"<p>International financial integration exposes countries to external shocks. This paper identifies the impact and transmission of global financial risk (GFR) shocks to emerging market economies (EMEs). Heightened GFR significantly raises EME borrowing costs and lowers equity returns, reducing domestic economic activity. We document a novel transmission channel of GFR shocks to EMEs via international capital flows. Countries experiencing larger capital inflows are more affected by GFR fluctuations. Exploring the transmission through capital flows, GFR shocks affect EMEs mainly through their effect on equity returns, instead of country spreads. We show that equity returns contain more information about EME macroeconomic fluctuations than sovereign and corporate bond spreads.</p>","PeriodicalId":1,"journal":{"name":"Accounts of Chemical Research","volume":"86 3","pages":"672-689"},"PeriodicalIF":16.4000,"publicationDate":"2024-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Accounts of Chemical Research","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/obes.12595","RegionNum":1,"RegionCategory":"化学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"CHEMISTRY, MULTIDISCIPLINARY","Score":null,"Total":0}
引用次数: 0
Abstract
International financial integration exposes countries to external shocks. This paper identifies the impact and transmission of global financial risk (GFR) shocks to emerging market economies (EMEs). Heightened GFR significantly raises EME borrowing costs and lowers equity returns, reducing domestic economic activity. We document a novel transmission channel of GFR shocks to EMEs via international capital flows. Countries experiencing larger capital inflows are more affected by GFR fluctuations. Exploring the transmission through capital flows, GFR shocks affect EMEs mainly through their effect on equity returns, instead of country spreads. We show that equity returns contain more information about EME macroeconomic fluctuations than sovereign and corporate bond spreads.
期刊介绍：
Accounts of Chemical Research presents short, concise and critical articles offering easy-to-read overviews of basic research and applications in all areas of chemistry and biochemistry. These short reviews focus on research from the author’s own laboratory and are designed to teach the reader about a research project. In addition, Accounts of Chemical Research publishes commentaries that give an informed opinion on a current research problem. Special Issues online are devoted to a single topic of unusual activity and significance.
Accounts of Chemical Research replaces the traditional article abstract with an article "Conspectus." These entries synopsize the research affording the reader a closer look at the content and significance of an article. Through this provision of a more detailed description of the article contents, the Conspectus enhances the article's discoverability by search engines and the exposure for the research.
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