Dependence of the “Fragile Five” and “Troubled Ten” emerging market financial systems on US monetary policy and monetary policy uncertainty

Chadwick, Meltem

doi:10.1016/j.ribaf.2019.04.002

Cited by 22 publications

(8 citation statements)

References 8 publications

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“…The former is particularly relevant, as pointed out in the introduction, when the financial system is under stress. policy affects emerging country financial system risks (Chadwick, 2019). Empirically understanding the link between risk aversion and the risk premium in these situations would be badly mismeasured using the Arrow-Pratt approximation, which has potential implications for capital allocation investment decisions, whereas our proposed approximation would be noticeably more accurate and thus more reliable.…”

Section: Discussionmentioning

confidence: 99%

“…Sanders points out that a misunderstanding of risk in these markets contributed to the crisis [2]. Cuickerman (2019) and Chadwick (2019) detail how investors misperceived risk, that it was much higher than on assets such as mortgagebacked securities and collateralized debt obligations than realized. It is also important to note the findings of Gerrans et al (2015) on risk tolerance during the subprime crisis, who find that risk tolerance remained relatively stable over this time, only experiencing an economically small decrease, thereby providing evidence that changing risk attitudes were not a large factor in the mispricing of risk.…”

Section: Introductionmentioning

confidence: 99%

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A new approximation for the risk premium with large risks

Watt

Gunby

2021

JRF

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PurposeThe Arrow–Pratt approximation to the risk premium is only valid for small risks. In this paper we consider a second approximation, based on risk-neutral probabilities and which requires no greater information than the Arrow–Pratt approximation, that works well for both small and large risks.Design/methodology/approachThe paper is theoretical in nature, although it also provides illustrative numerical simulations.FindingsThe new approximation proposed here appears to be significantly superior to Arrow–Pratt for approximating the true value of the risk premium when the risk is large. It may also approximate better even for relatively small risks.Originality/valueAs far as we are aware, there are no other known approximations for the risk premium when the risk involved is large.

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Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

A new approximation for the risk premium with large risks

Watt

Gunby

2021

JRF

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“…They partially attributed this effect of an interest rate change on stock returns to different monetary policies and the more mature capital markets inherent in developed economies. Chadwick (2018) measured the dependence between emerging countries' financial markets to US monetary policy and monetary policy uncertainty using Patton's (2006) timevarying copula models. The study focused on the dependence of level differences in emerging countries on US monetary policy.…”

Section: Studies Related To Monetary Policy and The Stock Marketmentioning

confidence: 99%

Analysis of the Effects of the Central Bank’s Interest Announcements on Tourism Index Returns

Günay

Bayraktaroğlu

2022

Sosyoekonomi

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This paper examines the impact of interest rate announcements by the Central Bank of the Republic of Turkey (CBRT) on Borsa İstanbul tourism index returns. During the period covering 2010-2020, the effects of the CBRT's 20 decrease announcements and eight increase announcements on tourism index daily returns were examined separately using the event study method. Moreover, the BIST100 index was analysed for comparison purposes. According to the study results in which ARs were calculated with the mean adjusted return model, out of 20 announcements of decreases in the interest rate, only 3 showed statistically significant ARs on the event date. This result indicates that tourism investors' reactions to policy rate announcements are weak and suggests the policy rate does not affect tourism investors' reactions. The findings for the BIST100 support this idea.

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“…In 2013, a report by Morgan Stanley ranked Brazil, India, Indonesia, Turkey and South Africa as the five countries most vulnerable to these capital outflows, thus coining the term fragile five. As Chadwick (2019) indicates, these capital outflows resulted in the deterioration of key macroeconomic indicators and the depreciation of the fragile five currencies. These five countries have seen economic growth wane over time and have run persistent current account deficits.…”

Section: The Fragile Fivementioning

confidence: 99%

The Marshall-Lerner Condition in the Fragile Five Economies: Evidence from the ARDL Bounds Test Approach

Amaral¹,

Breitenbach²

2021

berj

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This paper evaluates the Marshall-Lerner condition in the fragile five economies of Brazil, India, Indonesia, South Africa, and Turkey and, in the process, offers an indication of whether the evaluation of this condition is subject to the limitations that have previously been identified in the literature. This research is novel as it studies a set of countries known as the fragile five, often overlooked in the literature. The ARDL Bounds methodology is used to estimate separate export and import demand equations. Results of the study show little evidence supporting the validity of the Marshall-Lerner condition in these five countries. All the models, except for those relating to Turkey, show signs of underlying issues such as model misspecification. The results imply that future empirical work on the Marshall-Lerner condition, particularly work centred on the fragile five, would likely need to address these underlying empirical issues in order to produce more consistent results.

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Dependence of the “Fragile Five” and “Troubled Ten” emerging market financial systems on US monetary policy and monetary policy uncertainty

Cited by 22 publications

References 8 publications

A new approximation for the risk premium with large risks

A new approximation for the risk premium with large risks

Analysis of the Effects of the Central Bank’s Interest Announcements on Tourism Index Returns

The Marshall-Lerner Condition in the Fragile Five Economies: Evidence from the ARDL Bounds Test Approach

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