Abstract
This study analyses the dynamics of integration among global financial markets in the context of Global Financial Crisis (2008) by employing a Panel Vector Autoregressive (VAR) model on the monthly data of nine countries and three markets from Jan 2003 to Oct 2015. It was found that there has been a shift in the association among the global financial markets since Global Financial Crisis (GFC). Moreover, the British financial sectors in Post- GFC world clearly showed a change in the association with the global financial sectors. Particularly, the emerging markets including China, Brazil and India showed a comparatively more significant impact on the UK financial sector implying the increased importance of the latter in the recent past. The German and USA financial sector also showed a change in its impact in the Post-GFC world. It showed that Germany and USA financial sectors have become competitive to the UK financial Sector as the surge in them lead to a relative response from the UK financial sector which could be associated with the portfolio adjustment.
Highlights
In the wake of financial crises, a number of studies have emphasised the importance of financial markets for the national and global economies
It showed that Germany and USA financial sectors have become competitive to the UK financial Sector as the surge in them lead to a relative response from the UK financial sector which could be associated with the portfolio adjustment
The financial crisis which was said to be a global phenomenon and the financial contingent spread across the world affecting almost every financial market, the question it raises is whether the relationship between financial markets in the Post-Global Financial Crisis (GFC) world has been dampened or strengthened
Summary
In the wake of financial crises, a number of studies have emphasised the importance of financial markets for the national and global economies. The caveat we are addressing in this study is looking beyond the boundaries and scope of national policies and institutions in terms of their influence on financial markets by investigating the dynamics of financial markets (stock, bonds and forex) linkages in the wake of Global Financial Crisis (GFC). We are interested in investigating how the association between the domestic and international financial markets has been changed over the GFC 2008. If that thesis is to be believed by having faith in the increase of market efficiency due to adverse shock and financial crisis, should there be an increase in efficiency due to GFC 2008? Perhaps, which is considered to be one in a century financial crisis or what implications could it have for the global financial linkages or the association and integration among the global financial markets?
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