Macroeconomics - ImagebankContents

About

Countries

Data & Research

Learning

News

Projects & Operations

Publications

Topics

Home > Data & Research > Research > Programs > Macroeconomics > ImagebankContents

Emerging market liquidity and crises

Author:	Yeyati, Eduardo Levy; Schmukler, Sergio L.; Van Horen, Neeltje;	Collection Title:	Policy Research working paper ; no. WPS 4445
Country:	World;	Date Stored:	2007/12/13
Document Date:	2007/12/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	The World Region
Report Number:	WPS4445	SubTopics:	Markets and Market Access; Emerging Markets; Economic Theory & Research; Debt Markets;
Volume No:	1 of 1

Summary: Whereas conventional wisdom argues that markets shut down during crises, with sellers struggling to find buyers, we find that markets continue to operate during financial turmoil, even in narrow and volatile emerging economies. Simple event studies indicate that both trading volume and trading costs increase in crisis times. Prices change more with each dollar transacted (pushing the Amihud illiquidity measure up) and bid-ask spreads widen. More generally, econometric estimates show that large price downturns, typical of crises, are associated with higher trading activity and increased trading costs, with trading activity declining only later as crises progress. Thus, while trading activity tends to be negatively related to trading costs during tranquil times (and across securities), this relation appears to break down during crises. These results are consistent with the analytical literature on portfolio rebalancing by heterogeneous agents in times of crises.


Official Documents Official, scanned versions of documents (may include signatures, etc.)
File Type		Description	File Size (mb)

	PDF 23 pages	Official version*	0.36
	Text	Text version**

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.

** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.

Permanent URL for this page: http://go.worldbank.org/AKWIKALL60