Something to think about:
http://www.voxeu.org/index.php?q=node/4043
The 2008 financial crisis is sometimes characterised as one where financial difficulties in the US spread to the rest of the world. But is there clear evidence of such international contagion? This column reports research indicating that neither financial nor trade linkages to the US help explain the cross-country incidence of the crisis. If anything, countries more exposed to the US seem to have fared better.
The article notes that countries that had disproportionately high amounts of trade did NOT experience more intense crises than other countries.
So does this mean that the global crisis was almost purely a psychological event? The US market tanked and investors around the world panicked regardless of how much they were exposed to the US?
Originally posted by MelanerpesIt's definitely a possibility. I find the fact that financial linkages (to use the authors expression) don't seem to be good indicators of contagion even more puzzling than trade.
The article notes that countries that had disproportionately high amounts of trade did NOT experience more intense crises than other countries.
So does this mean that the global crisis was almost purely a psychological event? The US market tanked and investors around the world panicked regardless of how much they were exposed to the US?
I'm not sure if "a psychological event" is a good description. It was not unreasonable to think that the crisis would be truly global and so investors around the world reacted according to that expectation. Is this just "animal spirits" and panic or an adjustment to (real) risk?
Linkages could also exist elsewhere, namely at a more micro level. If a few banks were exposed, but not others, then gross financial linkages might not be the correct measure because it depends to what extent only those particular banks are linked to each country. If a country has a lot of linkages with banks that are not exposed, this could mean high financial linkages overall, but relatively less exposure to the crisis.
At this point, I just find it interesting food for thought as our view of how and why it spread might require some further study.
It does seem to be an interesting study.
One would think that a country with a larger share of its wealth in America and also a country having a higher percentage of its exports tied to the US would indicate some higher level of exposure to contagion.
At the same time, we also saw during the crisis the paradox that was a "flight to quality" towards US Treasury Bills despite the fact that the crisis started in the US! WTF?
Part of the puzzle may simply have to do with a history of trust in the US that has built over a couple of hundred years of relatively trustworthy repayment of debt when owed and survival through prior crisis. Confidence may have preserved the value of wealth in the US as another haven for safety / flight-to-quality benefit for those who already had wealth in the US.
Also, what selection of countries have a high percentage of their wealth in the US, could it have been a selection of countries that is generally prudent in finding a certain level of safety and quality in its international asset-holdings and other prudent financial decisions in general?
Similarly for trade with the US, did trade fall off less for the US consuming economy where people live to spend rather than spend to live? Was there a selection of countries that are very open to trade with the US that indicate quality and prudence or ability to make it in a big and competitive market? Is it a regional stability thing?
Or... is it that China dominates some of these statistics by exporting much to the US and being a stable country that influences its neighbors postiively with its growth but yet its neighbors are Pacific Rim countries and they all trade heavily with the US...
Perhaps we should not expect trade or foreign asset-holdings to be the best proxies for risk of contagion?
One thing for certain, there is a lot of room for fun speculation.
Originally posted by eljefejesusCan anyone post the results alluded to in the article the link given in the OP pointed to. Other than taking the word of the authors(What evidence did they actually give? Anyone?), not knowing which countries were considered in that list to be the most exposed but least affected, its hard to know if the findings are reasonable or just another big thumb suck.
It does seem to be an interesting study..............................
One thing for certain, there is a lot of room for fun speculation.
Originally posted by kmax87Click. The. Link.
Can anyone post the results alluded to in the article the link given in the OP pointed to. Other than taking the word of the authors(What evidence did they actually give? Anyone?), not knowing which countries were considered in that list to be the most exposed but least affected, its hard to know if the findings are reasonable or just another big thumb suck.
Easy.
Originally posted by PalynkaHow about it being nothing more than a good reason to take eveyones money?
Something to think about:
http://www.voxeu.org/index.php?q=node/4043
The 2008 financial crisis is sometimes characterised as one where financial difficulties in the US spread to the rest of the world. But is there clear evidence of such international contagion? This column reports research indicating that neither financial nor trade linkages to the US ...[text shortened]... ence of the crisis. If anything, countries more exposed to the US seem to have fared better.
Originally posted by kmax87[i]Appendix Table A2: Key Data Sources
I did but the article revealed is nothing more than a sysnopsis of a more in depth study that you have to pay for.
Many of our data series were extracted in early 2009 from the World Bank’s World Development Indicators.21 Other key data sets are listed below. The entire (STATA 10.0) data set is available at
http://faculty.haas.berkeley.edu/arose/MIMIC2Data.zip.
National Sources
• Percentage change in 2008 broad stock market index
International Monetary Fund, International Financial Statistics
• Percentage change in2008 SDR exchange rate
International Monetary Fund, CPIS
• Table 8: international cross‐holdings of portfolio assets, debt, long‐term debt
International Monetary Fund, Direction of Trade Statistics
• Bilateral Export and Import flows
Euromoney and Institutional Investor magazines
• Country credit ratings
Economist Intelligence Unit, Country Reports
• 2008 growth estimate as of 3/2009
World Bank, Global Development Finance
• Percentages of Public and Publicly‐Guaranteed Debt denominated in dollars and yen
US Treasury, Treasury International Capital System
• Foreign holdings of American Assets, Equity, Long‐Term Debt, Debt, Treasuries, and
Long‐Term Treasuries
Originally posted by PalynkaThe article does not say who those highly cross inested nations were, or to the financial strategies they put into place once the crises engulfed America. So other than their word for it and the evidence of a few vaguely labelle graphs, where is there evidence?
Click. The. Link.
Easy.
Originally posted by PalynkaThat link produced a nice big fat "The page cannot be found error"
The entire (STATA 10.0) data set is available at
http://faculty.haas.berkeley.edu/arose/MIMIC2Data.zip.
If you have managed to download it, could you give me a sense of the top 5 nations most embedded into US trade, so that I at least could guage how insightful their analysis is?
Originally posted by SeitseCheck out my second post on this thread. It depends on what exactly you mean by herd behaviour, as there's always some sort of herd behaviour in any crash but this doesn't mean the crisis wasn't justified by underlying fundamentals.
P. Would you say it is reasonable to speculate that the whole
thing was due to the herd behavior re: cross border portfolio investment?
Originally posted by kmax87The link works. Are you copying the dot at the end?
That link produced a nice big fat "The page cannot be found error"
If you have managed to download it, could you give me a sense of the top 5 nations most embedded into US trade, so that I at least could guage how insightful their analysis is?
It's amusing to me to see your paranoia, so I'll let you do some of the work.
Originally posted by kmax87Shortening the link you gave I found A Rose's page and then found the preliminary draft of the report
That link produced a nice big fat "The page cannot be found error"
If you have managed to download it, could you give me a sense of the top 5 nations most embedded into US trade, so that I at least could guage how insightful their analysis is?
http://faculty.haas.berkeley.edu/arose
http://faculty.haas.berkeley.edu/arose/MIMIC2.pdf
I should have known to just to let this one slide. Reading about his MIMIC2 modelling rationale looked too much like coupled differential equations and state space equations to make me glaze over. Does anyone understand this sort of modelling to have a crack at exlplaining to us mere mortals if his assumptions and methodologies are any good? I mean they look like the equations you work up in turbulence modelling for flight control systems, but apart from that none of it makes any more sense......help