India has large twin deficits, high prices of some real assets, and (less familiar) fragile financial interdependence between banks and the government. So there is a systemic risk. However, India has a reasonably good record so far with regard to avoiding financial crises. This is due to five...

To date, an operational measure of systemic risk capturing non-linear tail comovement between system-wide and individual bank returns has not yet been developed. This paper proposes an extension of the so-called CoVaR measure that captures the asymmetric response of the banking system to...

Real estate investment accounts for a quarter of total fixed asset investment (FAI) in China. The real estate sector’s extensive industrial and financial linkages make it a special type of economic activity, especially where the credit creation process relies primarily on collateral, like...

This paper quantifies financial spillovers from global risk factors to banks’ funding costs in Chile. It decomposes Chilean banks’ bond and interbank spreads into domestic and external factors. The results suggest moderate spillovers. On average, global spillovers pushed up bank...

The degree of an economy’s monetization, which has an important implication on economic growth, can be affected by the conduct of monetary policy, financial sector reform, and episodes of financial crises. The paper finds that monetization--measured by the ratio of broad money to nominal...

We demonstrate empirically that not all capital flows influence exchange rates equally: Capital flows induced by foreign investors’ stock market transactions have both an economically significant and a permanent impact on exchange rates, whereas capital flows induced by foreign...

We present empirical evidence that the Thai baht’s value is driven in part by investors’ cross-border equity portfolio rebalancing decisions. Our results are based on comprehensive datasets of FX and stock market transactions undertaken by nonresident investors in Thailand in 2005...

Stock markets play a key role in corporate financing in Asia. However, despite their increasing importance in terms of size and cross-border investment activity, the region’s markets are reputed to be more “idiosyncratic†and less reliant on economic and corporate fundamentals...

What attracts conventional investors to Islamic financial instruments? We answer this question by comparing Malaysian Islamic and conventional security prices and their response to macrofinancial factors. Our analysis suggests that Islamic and conventional bond and equity prices are driven by...

This note shows that a big stock market crash, in the absence of central bank intervention, will be followed by a major recession one to four quarters later. I establish this fact by studying the forecasting ability of three models of the unemployment rate. I show that the connection between...