## _wp09104

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### Introduction and research objective
- Examines financial interlinkages between advanced and emerging market (EM) countries by focusing on co-movements of key financial variables.
- Advanced-economy proxies analyzed:
  - Stress in the interbanking market: U.S. Libor-OIS spread (3-month US dollar Libor-overnight index swap (OIS) spread).
  - Market volatility: S&P 500 returns and implied volatility measures (VIX, at-the-money implied volatility).
  - Default risk of major financial institutions: average CDS spread of selected large complex financial institutions (LCFIs).
- EM financial indicators analyzed:
  - Stock market indices.
  - Sovereign bond spreads: EMBI+ regional bond spreads (Latin America (LAC), Europe, Asia).
  - CDS indices and sovereign CDS spreads for selected EM countries (Brazil, Russia, Turkey, Mexico, South Africa).
- Methodological approach: Dynamic Conditional Correlation (DCC) GARCH model (Engle, 2002) to infer time-varying correlations and account for time-varying volatility and feedback effects.

### Crisis timeline and qualitative transmission to emerging markets
- Crisis origin and key dates:
  - Subprime mortgage market deterioration began in the summer of 2007.
  - Sharp early market sign: Shanghai stock market correction in late February 2007.
  - Bear Stearns rescue: March 2008 (noted as March 16, 2008 Fed announcement related episode).
  - Lehman collapse: September 15, 2008 — identified as the key event that unleashed a systemic crisis and triggered rapid spillovers to EMs.
- Crisis dynamics and transmission channels:
  - Rising delinquencies, rising refinancing interest rates, and falling house prices undermined structured credit products (ABS/ABX indices declined; secondary market liquidity evaporated).
  - Interbank funding stress increased; Libor-OIS spread widened sharply, reflecting liquidity and counterparty risk.
  - Carry trades unwound rapidly at end-September 2008: high-yielding EM currencies depreciated sharply versus the U.S. dollar; funding currencies like the Japanese yen appreciated.
  - Flight to quality: gold price rose from $660 per ounce in August 2007 to $1002 around the Bear Stearns rescue and Fed announcement on March 16, 2008, then dropped 10% shortly after; strong demand for 10-year U.S. Treasuries caused yields to almost halve between crisis onset and the Bear Stearns and Lehman episodes.
  - Deviations from covered interest rate parity (CIRP) jumped at the Bear Stearns rescue and broke down for various EM currencies after Lehman.
  - Hedge funds facing margin calls sold liquid assets across asset classes; liquidity around structured investments evaporated, increasing volatility and trading volumes.
- EM heterogeneity and real-sector impacts:
  - EM equity and debt mutual fund flows turned negative; total foreign assets peaked in November 2007, EM debt mutual fund investments fell rapidly beginning in September 2008.
  - Sovereign spreads and CDS soared across many EM countries; EMBI+ spreads jumped to over 800 basis points in late October 2008 following Lehman.
  - Countries with large current account deficits and heavy reliance on foreign wholesale funding were most affected (examples cited: IMF support to Ukraine and Hungary in October 2008; Pakistan in November 2008; Latvia in December 2008).
  - Countries with large foreign reserves (example: South Korea, Russia) deployed reserves to stem currency pressures and banking sector strains.
  - Real-sector transmission: declines in demand and trade finance led to plunging industrial production and GDP growth; policy responses included large fiscal stimulus measures such as China’s over $500 billion plan in November 2008.
- Earlier episode:
  - End-February 2007 sell-off was short-lived but produced a rapid global reappraisal of risk; ABX (BBB) index began to decline; carry trades in currencies such as Brazil, South Africa, Turkey unwound.

### Data, sample, and preprocessing
- Main variables and proxies:
  - Daily 3-month US dollar Libor-OIS spread as measure of bank funding liquidity/interbank stress.
  - S&P 500 stock market returns; variance used as proxy for market volatility.
  - Average CDS spread of selected LCFIs: Citigroup, Bank of America, JP Morgan, Wachovia, Merill Lynch, Morgan Stanley, Goldman Sachs, Lehman Brothers, HSBC, Royal Bank of Scotland, UBS, Deutsche Bank. After Lehman Brothers collapse, average CDS values for Goldman Sachs, Merrill Lynch and Morgan Stanley were used for the Lehman Brothers time series data.
  - EMBI+ spreads for regional sovereign risk: Latin America (LAC), Europe, Asia.
  - Individual country focus: Brazil, Russia, Turkey, Mexico, South Africa.
- Sample period and preprocessing:
  - Data sample: January 3rd 2003 until December 31st 2008.
  - Unit root tests identified nonstationarity for the crisis period; first differences of spreads taken for estimation.

### Methodology details
- Multivariate GARCH with DCC specification (Engle, 2002) used to model heteroskedasticity and time-varying conditional correlations.
- Three-stage DCC estimation procedure:
  1. Fit univariate GARCH models to each variable to obtain D_t (diagonal matrix of standard deviations).
  2. Obtain intercept parameters from transformed asset returns.
  3. Estimate coefficients governing conditional correlation dynamics.
- Model notation and elements preserved as in source: r_t (n x 1 vector), H_t = D_t R_t D_t, R_t built from Q_t; S unconditional correlation matrix of residuals ε_t; A and B square symmetric matrices; Hadamard product used; λ_i and κ_i parameters describe weighting and squared lagged returns contributions.

### Key empirical findings (Section V)
- Implied correlation dynamics:
  - Implied correlations between the 3-month US Libor-OIS spread and EMBI+ bond spreads for Asia, Europe and LAC sharply increase after the subprime crisis; Lehman collapse caused the largest increase in co-movements.
  - China stock market correction in late February 2007 produced a temporary spike in correlation measures from 0.20 to almost 0.50.
  - Regional differences:
    - Asian EMBI+ exhibited largest pre-subprime correlation (with exceptions).
    - LAC EMBI+ correlation showed the greatest rise immediately following Lehman failure.
  - S&P 500 relationships:
    - Changes in S&P 500 and EMBI regional bond spreads abruptly changed during Shanghai correction with correlations moving to almost -0.60; co-movement remained elevated and peaked in September 2008.
    - Interlinkages between S&P 500 and LAC EMBI spread dominated other regions.
  - CDS relationships:
    - CDS default risk measure and regional bond spreads show substantial and persistent increases in correlations beginning in July 2007 and staying high through the crisis.
- Country-level interlinkages with Libor-OIS:
  - Brazil shows the largest correlation across bond spread, CDS and stock market volatility measures during the crisis period; attributed to open capital account, dramatic increase in bond risk premia, large foreign equity outflows, and liquidity of foreign bond and equity markets enabling unwinding by mutual and hedge funds.
  - Mexico and South Africa: co-movements increased significantly during the crisis; Mexico’s co-movements with U.S. stress proxies more pronounced given geographic/economic proximity.
- LCFI CDS co-movements:
  - Correlation spikes among CDS measures are less pronounced than Libor-OIS but highly persistent, suggesting liquidity and solvency aspects were central to spillovers.
- Overall interpretation:
  - Empirical evidence contradicts the notion of financial market decoupling; funding stress and equity market stress in advanced economies became highly correlated with EM financial indicators during crisis moments.
  - Co-movements between funding stress and bank default risk in advanced economies and EM bond spreads and equity returns were similar in magnitude during the financial crisis.
  - Rapid increases in global risk aversion in advanced economies transmitted to EM countries via portfolio outflows and flight to quality into mature market fixed income.

### Conclusions, limitations, and policy implications (Section VI)
- Main conclusions:
  - Interaction between liquidity (Libor-OIS) and bank solvency (CDS) with EM stock, bond and credit markets intensified during the Global Financial Crisis.
  - Multivariate GARCH estimates show both Libor-OIS spread and CDS spread became more correlated with EM bond, stock and credit markets, especially around the Shanghai correction, summer 2007 onset, Bear Stearns rescue, and Lehman bankruptcy.
  - Evidence that financial market decoupling was misplaced; interconnectedness transmitted risk rapidly to EMs.
- Limitations and suggestions for future work:
  - Paper does not analyze exact causal relationships among variables in advanced and EM countries; daily high-frequency data likely contains significant feedback loops; causal analysis reserved for future research.
- Policy implication:
  - Spillovers need to be closely attended to given the interconnectedness of global financial markets.

*Source: _wp09104*

### Introduction............................................................................................................

### I. INTRODUCTION

### Crisis timeline and initial transmission to emerging markets (EM)
- The sub-prime mortgage market burst and the unraveling of the securitization process began in the summer of 2007 in the United States, but initially did not fully affect emerging markets (EM).
- EM stock markets peaked around November 2007, while U.S. repercussions were already apparent (central banks injecting liquidity into interbanking markets and major financial institutions announcing massive writedowns from structured financial products).
- The Lehman collapse on September 15, 2008 is identified as a key event that unleashed a full-blown systemic crisis:
  - Global risk aversion dramatically increased.
  - Asset markets across countries and regions plunged.
  - Unwinding of carry trades caused sharp currency depreciations in high-yielding EM currencies within a short period.
- By late 2008 the financial contagion spilled over to the real sector with export and GDP growth rates plunging and trade finance contracting globally.

### Research objective and variables analyzed
- The paper examines financial interlinkages between advanced and EM countries by focusing on co-movements of key financial variables.
- Advanced-economy proxies examined include:
  - Stress in the interbanking market (U.S. Libor-OIS spread as a proxy for funding illiquidity).
  - Market volatility.
  - Default risk of major financial institutions.
- EM financial indicators examined include:
  - Stock market indices.
  - Sovereign bond spreads (EMBI+ regional bond spreads).
  - CDS indices and sovereign CDS spreads for selected EM countries.

### Methodology
- Standard correlations can be biased when examining spillovers and systemic risk (Forbes and Rigobon, 2002); the Dynamic Conditional Correlation (DCC) GARCH model by Engle (2002) is used to avoid many pitfalls.
- The DCC GARCH framework infers time-varying correlations of changes in the financial variables, allowing assessment of whether financial distress became systemic.
- The framework takes time-varying volatility into account and addresses possible feedback effects since unidirectionality is not imposed.

### Main empirical findings
- Implied correlations between the U.S. Libor-OIS spread and EMBI+ sovereign bond spreads of Asia, Europe, and Latin American countries sharply increase following the onset of the subprime crisis.
- The Shanghai stock market correction in February 2007 produced a temporary spike in correlation measures.
- The Lehman collapse caused the largest increase in co-movements among the examined variables.
- The relationship between the S&P 500 and the EMBI+ regional bond spreads exhibits a potential break during the Chinese episode; correlations:
  - Increase from the beginning of the subprime crisis.
  - Reach their peak after the Lehman failure.
- Country-level interlinkages:
  - The U.S. Libor spread is related to sovereign bond and sovereign CDS spreads of Brazil, Russia, Turkey, Mexico, and South Africa.
  - The Shanghai correction in February 2007 and the beginnings of the subprime episode and the Lehman collapse are evident in these co-movements.
  - The Bear Stearns rescue in March 2008 becomes visible with co-movements sharply reversing their downward trend prior to that.

### Interpretation and implications
- The DCC GARCH results indicate that the notion of possible de-coupling (in financial markets) had been misplaced:
  - Although EM stock markets peaked around November 2007, interlinkages between funding stress and equity markets in advanced economies and EM financial indicators were highly correlated and saw sharp increases during specific crisis moments.
- Given global financial interconnectedness, increases in investors' global risk aversion originating in advanced economies rapidly spilled over into EM countries as investors sought the safest and most liquid assets in home markets (e.g., fixed income securities).

### Relation to existing literature and contributions
- Builds upon Frank, Gonzalez-Hermosillo and Hesse (2008) and IMF (2008) on liquidity spillovers.
- Connects with extensive literature on spillovers and contagion (e.g., Dungey, Fry, Gonzalez-Hermosillo and Martin; Dornbusch, Park and Claessens; Pericoli and Sbracia).
- Adds to studies of volatility and conditional correlations during crises (e.g., Forbes and Rigobon, King, Sentana, and Wadhwani, Caporale et al.).
- Contributes to the literature by:
  - Examining daily co-movements between advanced-economy stress indicators and EM stock, bond spread, and CDS measures.
  - Using the DCC framework to account for time-varying volatility and potential feedback effects.
  - Identifying end-February 2007 as a temporary period where early signs of global market stress emerged prior to mid-2007 revelations of the subprime crisis, consistent with The Federal Reserve Bank of Dallas (2008), Gorton (2008), Gonzalez-Hermosillo (2008), and IMF (2008).

*Source: _wp09104 - Introduction*

### Section V examines the main results whilst Section VII concludes.

### _wp09104 - Section V examines the main results whilst Section VII concludes.

### Transmission of spillovers to EM countries during the subprime crisis: qualitative overview
- Lehman collapse on September 15, 2008, identified as a key event that led to rapid spillovers to emerging market (EM) countries by sharply increasing uncertainty and causing a scramble for U.S. dollars with the break-down of the carry trade and the need for financial institutions to refinance U.S. dollar positions.
- Crisis origin and propagation:
  - Subprime crisis began in the summer of 2007 and was triggered by deteriorating quality of U.S. subprime mortgages; characterized as a credit, rather than a liquidity event.
  - Rising delinquencies, rising refinancing interest rates, and falling house prices undermined structured credit products and led to rating agency downgrades and methodological changes.
  - Structured credit mortgage-backed instruments (measured by the ABS/ABX indices) saw rapid declines and evaporation of secondary market liquidity.
- Intermediary distress and liquidity spirals:
  - Wide range of financial institutions, including off-balance-sheet conduits and structured investment vehicles (SIVs), were exposed; inability to roll over ABCP forced banks to reabsorb assets, straining balance sheets.
  - Interbank lending declined due to liquidity and credit risk, producing a run for “liquidity.”
  - Libor-OIS spread widened as a proxy for interbank stress; Lehman collapse intensified counterparty and liquidity risk and failures to honor repo deliveries of U.S. Treasuries increased.
- Flight to quality episodes:
  - Gold price rose from $660 per ounce in August 2007 to $1002 around the Bear Stearns rescue and Fed announcement on March 16, 2008, then dropped 10% shortly after.
  - Strong demand for 10-year U.S. Treasuries as a ‘safe’ haven caused yields to almost halve between crisis onset and the Bear Stearns and Lehman episodes.
  - Deviations from covered interest rate parity (CIRP) jumped at the Bear Stearns rescue and broke down for various EM currencies after Lehman.
- Market behavior and volatility:
  - VIX and other implied equity volatility indices show a structural break since Lehman; at-the-money implied volatility of major financial institutions co-moves closely with respective CDS spreads.
  - Hedge funds facing margin calls sold liquid assets across asset classes, transmitting stress; trading volumes rose and liquidity around structured investments evaporated.
- Currency markets and carry trade unwind:
  - Carry trades rapidly unwound at end-September 2008; high-yielding past investment currencies depreciated versus the U.S. dollar; funding currencies like the Japanese yen appreciated.
  - Euro-U.S. Dollar swap rates showed higher volatility; daily deviations from CIRP increased markedly.
- EM impacts and heterogeneity:
  - EM equity and debt mutual fund flows turned negative; total foreign assets peaked in November 2007, EM debt mutual fund investments fell rapidly beginning in September 2008.
  - Sovereign spreads and CDS soared across many EM countries as portfolio outflows and flight to quality accelerated.
  - EM countries with large current account deficits and heavy reliance on foreign wholesale funding were most affected (examples: IMF support to Ukraine and Hungary in October 2008; Pakistan in November 2008; Latvia in December 2008).
  - Countries with large foreign reserves (e.g., South Korea, Russia) deployed reserves to stem currency pressures and banking sector strains.
  - Real-sector transmission: declines in demand and trade finance led to plunging industrial production and GDP growth; policy responses included large fiscal stimulus measures such as China’s over $500 billion plan in November 2008.
- Earlier episode: February 2007 emerging market sell-off:
  - Sharp sell-off beginning late-February 2007 (short-lived) showed rapid global reappraisal of risk; ABX (BBB) index began to decline; carry trades in currencies such as Brazil, South Africa, Turkey unwound.

### Data
- Main variables and proxies:
  - Daily 3-month US dollar Libor-overnight index swap (OIS) spread used as a measure of bank funding liquidity and interbank market stress.
  - S&P 500 stock market returns included to control for common shocks; variance used as proxy for market volatility.
  - Average CDS spread of selected large complex financial institutions (LCFIs): Citigroup, Bank of America, JP Morgan, Wachovia, Merill Lynch, Morgan Stanley, Goldman Sachs, Lehman Brothers, HSBC, Royal Bank of Scotland, UBS, Deutsche Bank. Note: after the Lehman Brothers collapse, average CDS values for Goldman Sachs, Merrill Lynch and Morgan Stanley were used for the Lehman Brothers time series data.
  - EMBI+ spreads used for regional sovereign risk: Latin America (LAC), Europe, Asia.
  - Individual country focus: Brazil, Russia, Turkey, Mexico, South Africa.
- Sample and preprocessing:
  - Data sample encompasses January 3rd 2003 until December 31st 2008.
  - Unit root tests identified nonstationarity for the crisis period; first differences of spreads taken for estimation.
- Observed data patterns:
  - Libor-OIS spread negligible prior to subprime crisis, increased drastically in late July 2007, subsided after mid-August central bank interventions, then widened sharply again with end-of-year effects and subsequent events; Lehman led to near breakdown of interbank market with massive dollar shortage and higher margins/haircuts.
  - S&P 500 peaked in October 2007 with temporary corrections (Shanghai February 2007, July 2007); sharp falls in January 2008, March 2008 (Bear Stearns rescue), and after Lehman collapse.
  - Regional EMBI+ spreads: Asia and LAC remained elevated relative to Europe; EMBI+ spreads jumped to over 800 basis points in late October 2008 following Lehman.
  - Country-level EMBI+/CDS and equity patterns: compression before crisis, widening during crisis; Brazil, Russia, Turkey equity indices peaked (Turkey October 2007; Brazil and Russia May 2008) before reversal.

### Methodology
- Multivariate GARCH framework with Dynamic Conditional Correlation (DCC) specification by Engle (2002) adopted to allow heteroskedasticity and time-varying conditional correlations.
  - DCC generalizes Bollerslev’s (1990) Constant Conditional Correlation (CCC) model; preferred because correlations can rapidly change during stress.
- Estimation procedure:
  - Three-stage DCC estimation: (1) fit univariate GARCH models to each variable to obtain D_t (diagonal matrix of standard deviations); (2) obtain intercept parameters from transformed asset returns; (3) estimate coefficients governing conditional correlation dynamics.
  - Notation: r_t is n x 1 vector of asset returns with time-varying covariance H_t = D_t R_t D_t where R_t is time-dependent correlation matrix built from Q_t; S is unconditional correlation matrix of residuals ε_t; A and B are square symmetric matrices; Hadamard product used; λ_i and κ_i parameters describe weighting and squared lagged returns contributions.

### Results (Section V)
- Key empirical findings from DCC GARCH estimates:
  - Implied correlations between the 3-month US Libor-OIS spread and EMBI+ bond spreads for Asia, Europe and LAC sharply increase after the subprime crisis; Lehman collapse caused the largest increase in co-movements.
  - China stock market correction in late February 2007 produced a temporary spike in correlation measures from 0.20 to almost 0.50.
  - Regional differences: Asian EMBI+ exhibited largest pre-subprime correlation (with exceptions); LAC EMBI+ correlation showed the greatest rise immediately following Lehman failure.
  - S&P 500 relationships:
    - Changes in S&P 500 and EMBI regional bond spreads abruptly changed during Shanghai correction with correlations moving to almost -0.60; co-movement remained elevated and peaked in September 2008.
    - Interlinkages between S&P 500 and LAC EMBI spread dominated other regions.
  - CDS relationships:
    - CDS default risk measure and regional bond spreads show substantial and persistent increases in correlations beginning in July 2007 and staying high through the crisis.
  - Country-level interlinkages with Libor-OIS:
    - Brazil shows the largest correlation across bond spread, CDS and stock market volatility measures during the crisis period; attributed to open capital account, dramatic increase in bond risk premia, large foreign equity outflows, and liquidity of foreign bond and equity markets enabling unwinding by mutual and hedge funds.
    - Mexico and South Africa: co-movements increased significantly during the crisis; Mexico’s co-movements with U.S. stress proxies more pronounced given geographic/economic proximity.
  - LCFI CDS co-movements:
    - Correlation spikes among CDS measures are less pronounced than Libor-OIS but highly persistent, suggesting liquidity and solvency aspects were central to spillovers.
- Overall interpretation:
  - Evidence contradicts notion of financial market decoupling; funding stress and equity market stress in advanced economies became highly correlated with EM financial indicators during crisis moments.
  - Co-movements between funding stress and bank default risk in advanced economies and EM bond spreads and equity returns were similar in magnitude during the financial crisis.
  - Rapid increases in global risk aversion in advanced economies transmitted to EM countries via portfolio outflows and flight to quality into mature market fixed income.

### Conclusion (Section VI)
- Main conclusions:
  - Interaction between liquidity (measured by Libor-OIS) and bank solvency (measured by CDS) with EM stock, bond and credit markets intensified during the Global Financial Crisis.
  - Multivariate GARCH estimates show both Libor-OIS spread and CDS spread became more correlated with EM bond, stock and credit markets, especially around the Shanghai correction, summer 2007 onset, Bear Stearns rescue, and Lehman bankruptcy.
  - Evidence that financial market decoupling was misplaced; interconnectedness transmitted risk rapidly to EMs.
- Limitations and future work:
  - The paper does not analyze exact causal relationships among variables in advanced and EM countries; daily high-frequency data likely contains significant feedback loops; causal analysis reserved for future research.
- Policy implication:
  - Spillovers need to be closely attended to given the interconnectedness of global financial markets.

*Source: IMF Working Paper PDF _wp09104 - Section V examines the main results whilst Section VII concludes.*

### REFERENCES

### REFERENCES

### Contagion, volatility spillovers, and market integration
- Beirne, J., G. M. Caporale, M. Schulze-Ghattas, and N. Spagnolo, 2008, “Volatility Spillovers and Contagion from Mature to Emerging Stock Markets,” IMF Working Paper 08/286 (Washington: International Monetary Fund).
- Bekaert, G, C.R. Harvey, and A. Ng, 2005, “Market Integration and Contagion,” Journal of Business, Vol. 78, No. 1, pp. 39–9.
- Dornbusch, R., Y.C. Park, and S. Claessens, 2000, “Contagion: How it Spreads and How it can be Stopped,” World Bank Research Observer, 15, pp. 177–97.
- Dungey, M., R. Fry, B. González-Hermosillo, and V. Martin, 2006, “Contagion in International Bond Markets during the Russian and LTCM Crises,” Journal of Financial Stability, Vol. 2, pp. 1–27.
- Dungey, M., R. Fry, B. González-Hermosillo, and V. Martin, 2005, “Empirical Modeling of Contagion: A Review of Methodologies,” Quantitative Finance, Vol. 5, pp. 9–24.
- Pericoli, M., and M. Sbracia, 2003, “A Primer on Financial Contagion,” Journal of Economic Surveys, Vol. 17, pp. 571–608.
- Kaminsky, G.L., and C.M. Reinhart, 2003, “The Center and the Periphery: The Globalization of Financial Turmoil,” NBER Working Paper No. 9479 (Cambridge: National Bureau of Economic Research)
- Kodres, L., and M. Pritsker, 2002, “A Rational Expectations Model of Financial Contagion,” Journal of Finance, Vol. 57, pp. 769–99.

### Volatility dynamics, correlations, and transmission
- Capiello, L., R. F. Engle, and K. Sheppard, 2006, “Asymmetric Dynamics in the Correlations of Global Equity and Bond Returns,” Journal of Financial Econometrics, Vol. 4, No. 4, pp. 537–72.
- Caporale, G.M., N. Pittis, and N. Spagnolo, 2006, “Volatility Transmission and Financial Crises,” Journal of Economics and Finance, Vol. 30, No.3, pp.376–90.
- King, M., E. Sentana, and S. Wadhwani, 1994, “Volatility and Links between National Stock Markets,” Econometrica, Vol. 62, pp. 901–33.
- King, M., and S. Wadhwani, 1990, “Transmission of Volatility between Stock Markets,” Review of Financial Studies, Vol.3, No.1, pp. 5–33.
- Engle, R. 2002, “Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models,” Journal of Business & Economic Statistics, Vol. 20, pp. 339–50.

### Financial crises, liquidity, risk appetite, and policy discussions
- Coudert, V., and M. Gex, 2007, “Does Risk Aversion Drive Financial Crises? Testing the Predictive Power of Empirical Indicators,” Centre d’Etudes Prospectives et d’Informations Internationales, Working Paper No. 2007–02.
- Dell’Ariccia, G., D. Igan, and L. Laeven, 2008, “Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market, (unpublished; Washington: International Monetary Fund)
- Federal Reserve Bank of Dallas, 2008, Economic Letter, “Fed Intervention: Managing Moral Hazard in Financial Crises,” Vol. 3, No. 10 (October).
- Frank, N., B. González-Hermosillo, and H. Hesse, 2008, “Transmission of Liquidity Shocks: Evidence from the 2007 Subprime Crisis,” IMF Working Paper 08/200 (Washington: International Monetary Fund).
- González-Hermosillo, B., 2008, “Investor’s Risk Appetite and Global Financial Market Conditions” (Washington: International Monetary Fund).
- Gorton, G., 2008, “The Panic of 2007,” Prepared for the Federal Reserve Bank of Kansas City, Jackson Hole Conference, August.
- International Monetary Fund, 2009, Global Financial Stability Report, “Warnings of Systemic Risk” (Chapter 3), World Economic and Financial Surveys (Washington, April).
- Khandani, A. E., and A. Lo, 2007, “What Happened to the Quants in August 2007?” MIT Working Paper (Cambridge, Massachusetts: Massachusetts Institute of Technology,
- Kiff, J., and P. Mills, 2008, “Money for Nothing and Checks for Free: Recent Developments in U.S. Subprime Mortgage Markets,” IMF Working Paper 07/188 (Washington: International Monetary Fund).
- Forbes, K., and R. Rigobon, 2002, “No Contagion, Only Interdependence: Measuring Stock Market Co-movements,” Journal of Finance, Vol. 57, No. 5, pp. 2223–61.

*Source: _wp09104 - REFERENCES*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2009/_wp09104.pdf_