Cross-Border Spillovers of Financial Stress Shocks: Evidence and Policy Implications

  • Wang Chen
  • Takuji Kinkyo


The global financial crisis of 2007–09 has promoted a renewed interest in cross-border spillovers of financial stress shocks. Financial stress is a serious disruption to the proper functioning of financial markets that has adverse effects on real economic activity. The US subprime mortgage crisis developed into a full-blown financial crisis, spreading the financial stress quickly to the rest of the world. The underlying cause of the crisis was the combination of excessive risk taking by private sectors and the failure of public sectors to address systemic risks arising from market failures. In response to the crisis, internationally coordinated efforts have been made to increase the resilience of global financial systems by promoting a range of regulatory reforms. However, the question remains as to whether the global financial systems will become much more resilient by the ongoing reforms.


Real Exchange Rate Financial Stress Structural Shock Real Effective Exchange Rate Federal Fund Rate 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



We are very grateful to Pierre Jacquet and Kashyap Arora for their insightful and useful comments on the earlier version of the paper. We retain responsibility for any remaining errors.


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© Indian Council for Research on International Economic Relations 2016

Authors and Affiliations

  1. 1.Policy Research InstituteMinistry of FinanceTokyoJapan
  2. 2.Kobe UniversityKobeJapan

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