Contagion of the US subprime mortgage crisis to emerging and transitional economies: experience and possible lessons
by Chu V. Nguyen
J. for Global Business Advancement (JGBA), Vol. 4, No. 3, 2011

Abstract: The impact of the US subprime crisis on the Chinese and Vietnamese transitional and the Colombian and Mexican emerging economies is analysed. The constant mean returns model was estimated and used to derive the ‘abnormal returns’ on the share prices of these economies. The cumulative and the average abnormal returns were also calculated. The results revealed that the financial crisis affected each of these economies differently. As compared to the US share price behaviour, the empirical findings indicate that the subprime mortgage crisis’ impact on the Mexican and the Vietnamese economies preceded, while its impact on the Chinese and Colombian economies followed the event month. This phenomenon is attributable to the fluid nature of the remittances by expatriate Mexican and Vietnamese from the USA to their home countries. These findings should be of special interest to policymakers in developing economies in formulating their national economic policies.

Online publication date: Sun, 23-Oct-2011

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