Financial market integration and financial crises: the case of big emerging market (BEM) economies

Abstract

Due to liberalisation policies, capital market integration has increased in the international arena. As a result, linkages between emerging markets and the USA have also increased. In this study, we examine the international financial market linkages between 11 big emerging stock markets (China, Brazil, Egypt, India, and Indonesia etc.). To figure out the relationship between emerging countries and US market, both the daily closing stock price of the 11 emerging countries indices and those of US indices are collected from the periods of before, during and after the 2007 financial crisis. The short-term effects were measured using the VAR model. To check all the countries stock indices’ stationarity, the ADF unit root test was used, followed by a VAR Pairwise Granger causality/block exogeneity Wald. The analysis results are further discussed.