Over the past two decades, most emerging market economies witnessed two key developments. A marked process of financial integration with the rest of the world, arguably turning these economies more vulnerable to global financial shocks; and an improvement of macroeconomic fundamentals, helping...

This paper assesses the vulnerability of emerging markets and their banks to aggregate shocks. We find significant links between banks' asset quality, credit and macroeconomic aggregates. Lower economic growth, an exchange rate depreciation, weaker terms of trade and a fall in debt-creating...

We review the impact of the global financial crisis, and its spillovers into the sovereign sector of the euro area, on the international "rules of the game for dealing with sovereign debt crises. These rules rest on two main pillars. The most important is the IMF's lending framework (policies,...

The paper presents a tractable model to understand how international financial institutions (IFIs) should deal with the sovereign debt crisis of a systemic country, in which case private creditors' bail-ins entail international spillovers. Besides lending to the country up to its borrowing...

One of the challenges of financial stability analysis and bank stress testing is how to establish scenarios with meaningful macro-financial linkages, i.e., taking into account spillover effects and other forms of contagion. We come up with an approach to simulate the potential impact of...

We study the impact of the US quantitative easing (QE) on both the emerging and advanced economies, estimating a global vector error-correction model (GVECM) and conducting counterfactual analyses. We focus on the effects of reductions in the US term and corporate spreads. First, US QE measures...

This paper tests for evidence of contagion between the financial markets of Thailand, Malaysia, Indonesia, Korea, and the Philippines. Cross-country correlations among currencies and sovereign spreads are found to increase significantly during the crisis period, whereas the equity market...

For a sample of 83 financial institutions during 2003–2011, this paper attempts to answer three questions: first, what is the evolution of banks' stock price exposure to country-level and global risk factors as approximated by equity indices; second, which bank-specific characteristics explain...

The recent European sovereign debt crisis highlighted the critical role of regional lending arrangements. For the first time, European mechanisms were called to design financing programmes for member countries in trouble. This paper analyses how the risk of contagion, an essential characteristic...