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N° 2010-11 |
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| July 2010 |
The Effects of the Subprime Crisis on the Latin American
Financial Markets:
An Empirical Assessment |
Gilles Dufrénot
Valérie Mignon
Anne Péguin-Feissolle |
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| The aim of this article is to answer the following question: can the considerable rise in the
volatility of the LAC stock markets in the aftermath of the 2007/2008 crisis be explained by
the worsening financial environment in the US markets? To this end, we rely on a timevarying
transition probability Markov-switching model, in which “crisis” and “non-crisis” periods are identified endogenously. Using daily data from January 2004 to April 2009, our
findings do not validate the “financial decoupling” hypothesis since we show that the
financial stress in the US markets is transmitted to the LAC’s stock market volatility,
especially in Mexico. |
Non-technical summary  |
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Résumé
non-technique
en français |
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| Full text |
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| Stock markets, volatility, financial stress, regime-switching, Markovswitching
model |
Keywords |
| C13, C22, G01, G15 |
JEL classification |
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