Transmission of the U.S. subprime crisis to emerging markets: Evidence on the decoupling–recoupling hypothesis

Abstract

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The world financial crisis and the international financing of Brazilian companies

“…Gorton (2009) affirms that the greatest problem in the subprime crisis resided in the fact that nobody imagined that risk was present and so close at hand. Dooley and Hutchison (2009) consider that one of the most impressive characteristics of this crisis lays in the absence of indicators showing that the U.S. economy was on the brink of disaster. They argue that the figures for industrial activity, exports and retail sales did not deteriorate during the period leading up to the Lehman Brothers collapse.…”

“…We proceed to review the literature about the impact of the credit crunch on emerging markets. Dooley and Hutchison (2009) believe that the run on the banks that occurred in October 2008 in the U.S. was a determining factor in the paralysis that gripped the U.S. credit market. The consequences of this event had a direct impact on other developed countries' credit markets because their banks also came to have information-sensitive securities in their assets.…”

“…The crisis affected capital availability and an ensuing credit crunch reached emerging markets, Brazil included, possibly affecting the mix and the terms of their domestic and international financing. Even though there was an initial perception that the effects of the crisis were minor in Brazil, the recurrence of financial crises motivates a comparative analysis of the behavior of the domestic-international mix and of the determinants of the international financing mix before and during the crisis (Bacha & Goldfajn, 2009;Dooley & Hutchison, 2009;O. Barros & Giambiagi, 2009).…”

Transmission of the Global Financial Crisis to the East Asian Equity Markets

“…The crisis intensified in the second half of 2008 after the U.S. State Bank and Government refused to rescue Lehman Brother's and confirmed the collapse of the American International Group. These events partly caused panic for both investors and financial institutions in the world, leading to a sharp decline in global equity markets which lasted until the first quarter of 2009 (Bartram & Bodnar, 2009;Dooley & Hutchison, 2009). For a full comprehensive review of the history of the GFC refer to the study by Arestis;Sobreira and Oreiro (2011).…”

“…Research documenting the impacts of the GFC at the country, regional and global markets has been performed by Dooley & Hutchison (2009), Markwat, Kole, & van Dijk (2009), Bartram and Bodnar (2009), Claessens, Claessens et al, (2010) and Allen & Carletti (2010)). In addition, several studies indicate that the GFC was more serious than previous crises.…”