Emerging Economies in the 2000s : Real Decoupling and Financial Recoupling

The paper documents an intriguing development in the emerging world in the 2000s: a decoupling from the business cycle of advanced countries, combined with the strengthening of the co-movements in the main emerging market assets that predates the s...

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Bibliographic Details
Main Authors:	Yeyati, Eduardo Levy, Williams, Tomas
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ABSOLUTE VALUE ABSOLUTE VALUES ADVANCED COUNTRIES ADVANCED ECONOMIES ANNUAL GROWTH ANNUAL GROWTH RATES AR ARBITRAGE ASSET CLASS ASSET HOLDINGS ASSET MANAGER ASSET MANAGERS ASSET POSITIONS ASSET PRICES ASSET RETURNS ASSETS ASSETS UNDER MANAGEMENT BALANCE OF PAYMENTS BALANCE OF PAYMENTS FLOWS BANKING SECTORS BENCHMARKING BENCHMARKS BOND BOND FUNDS BOND MARKET BOND SPREADS BUSINESS CYCLE BUSINESS CYCLES CAPITAL ACCOUNT CAPITAL ACCOUNT LIBERALIZATION CAPITAL CONTROLS CAPITAL FLIGHT CAPITAL FLOWS CAPITAL INFLOWS CAPITAL MARKETS CAPITAL MOBILITY CDS COMMODITY COMMODITY PRICES CORRELATION COEFFICIENTS COUNTRY EQUITY COUNTRY FIXED EFFECTS COUNTRY PORTFOLIOS CREDIT SPREADS CROSS-BORDER FLOWS CROSS-COUNTRY STUDY CURRENCY CURRENCY FLOWS CURRENCY MARKETS CURRENCY RETURNS CUSTODIANS DATA AVAILABILITY DEBT INSTRUMENTS DEPENDENT VARIABLES DEPOSIT DEVELOPING COUNTRIES DEVELOPMENT POLICY DIVERSIFICATION ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC POLICIES ECONOMIC PROGRESS ECONOMIC SIZE EMERGING ECONOMIES EMERGING MARKET EMERGING MARKET ASSETS EMERGING MARKET EQUITY EMERGING MARKETS EQUITIES EQUITY FUNDS EQUITY HOLDINGS EQUITY INDEXES EQUITY INSTRUMENTS EQUITY MARKET EQUITY MARKET CAPITALIZATION EQUITY MARKETS EQUITY RETURNS EURO ZONE EXCESS RETURNS EXCHANGE RATE EXCHANGE RATES EXPECTED RETURN EXPORTERS EXPOSURE EXTERNAL SHOCKS FINANCIAL CAPITAL FINANCIAL COMPANIES FINANCIAL CONTAGION FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL MARKETS FINANCIAL OPENNESS FINANCIAL SUPPORT FIXED INCOME FORECASTS FOREIGN ASSET FOREIGN ASSET HOLDINGS FOREIGN ASSET POSITIONS FOREIGN ASSETS FOREIGN BONDS FOREIGN EQUITY FOREIGN LIABILITY FOREIGN MARKET FOREIGN PORTFOLIO FOREIGN PORTFOLIO INVESTMENT FOREIGN STOCKS FUND FLOWS FUND MANAGERS FUND NET FUND RETURNS GDP GLOBAL ASSET GLOBAL ASSETS GLOBAL BUSINESS GLOBAL EQUITY GLOBAL EQUITY FUNDS GLOBAL FUND GLOBAL FUNDS GLOBAL GROWTH GLOBAL INDEXES GLOBAL INVESTOR GLOBAL INVESTORS GLOBAL MARKET GLOBAL MARKETS GLOBAL MUTUAL FUNDS GLOBAL RISK GLOBALIZATION GROWTH PERFORMANCE GROWTH RATE HARD CURRENCY HOLDING HOLDINGS HOST COUNTRY INDEX BENCHMARK INDIVIDUAL FUND INDIVIDUAL MUTUAL FUND INSTRUMENT INTEREST RATE INTEREST RATE PARITY INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL INTEGRATION INTERNATIONAL FINANCIAL MARKETS INTERNATIONAL FUNDS INTERNATIONAL INVESTOR INTERNATIONAL INVESTORS INTERNATIONAL MONEY INTERNATIONAL MUTUAL FUNDS INTERNATIONAL TRADE INVESTMENT DECISION INVESTOR BASE LEVY LIABILITY LIQUIDATION LIQUIDITY LIQUIDITY PREFERENCES LOCAL CURRENCY LOCAL EQUITY MARKET LOCAL MARKET LOCAL STOCK MARKET MACROECONOMIC RISK MARKET ASSETS MARKET CAPITALIZATION MARKET INFRASTRUCTURE MARKET PORTFOLIO MARKET RETURNS MARKET VALUE MARKET WEIGHTS MUTUAL FUND MUTUAL FUND DATA MUTUAL FUNDS NATIONAL INCOME NEWLY INDUSTRIALIZED COUNTRIES OPEN ECONOMIES OUTPUT OUTPUT GAPS OUTSTANDING DEBT PERCENTAGE OF ASSETS PORTFOLIO PORTFOLIO COMPOSITION PORTFOLIO INVESTOR PORTFOLIOS PRICE CHANGES PRICE VOLATILITY PROFESSIONAL INVESTORS REDEMPTIONS RELATIVE PRICE RETURN RETURN DIFFERENTIALS RETURNS RETURNS ON EQUITY RISK AVERSION RISK SHARING S&P S&P RETURNS SCATTER PLOT SECURITIES SOVEREIGN BOND SOVEREIGN BONDS SOVEREIGN DEBT STANDARD DEVIATION STOCK HOLDINGS STOCK MARKET STOCK MARKET DEVELOPMENT STOCK MARKET INDEX STOCK MARKET INDEXES STOCK MARKET RETURNS STOCK INDEX STOCKS THIRD WORLD TIME DUMMIES TIME HORIZONS TOTAL DEBT TRADING TRANQUIL PERIOD TRANSACTION TRANSACTION COSTS TREASURY TREASURY BONDS TURNOVER VALUATION VOLATILITIES VOLUME OF FLOWS WEALTH WEIGHTS WORLD ECONOMY
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20120202161000 http://hdl.handle.net/10986/3246

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Summary:	The paper documents an intriguing development in the emerging world in the 2000s: a decoupling from the business cycle of advanced countries, combined with the strengthening of the co-movements in the main emerging market assets that predates the synchronized sell-off during the crisis. In addition, the paper tests the hypothesis that financial globalization, to the extent that it creates a common, global investor base for emerging markets, could lead to a tighter asset correlation despite the weaker economic ties. While an examination of the impact of alternative financial globalization proxies does not yield conclusive results, a closer look at global emerging market equity and bond funds shows that the latter indeed foster financial recoupling during downturns, reflecting the fact that they trade near their respective benchmarks and respond to withdrawals by liquidating holdings across the board.

Emerging Economies in the 2000s : Real Decoupling and Financial Recoupling

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