The Global Linkages Conference was held in Washington, DC, on January 30-31, 2003. The conference emerged from the concern that even though countries are becoming increasingly interconnected through trade and financial linkages, the impact of these linkages on the international transmission of economic shocks is not yet well understood. In particular, the implications of these linkages for comovement across national financial markets and for the synchronization of business cycles across countries are often ambiguous in theory. A key goal of the conference, therefore, was to establish a set of empirical, stylized facts about the implications of growing financial and real linkages for business cycles, financial markets, and government policy. The conference was attended by researchers from academia, IMF staff members, and policymakers from around the world. The discussants included Kathryn Dominguez (University of Michigan), Andy Rose (University of California, Berkeley), Andrew Ang (Columbia University Business School), Robert Flood (IMF), Steve Kamin (Federal Reserve Board), John Campbell (Harvard University), Sergio Schmukler (World Bank), Marianne Baxter (Boston University), David Backus (New York University), and Yishay Yafeh (Hebrew University). A selection of papers presented at the conference will be published in an upcoming symposium of The Review of Economics and Statistics.
The main findings of the conference can be summarized as follows. First, there is a positive and significant association between comovement across national stock markets and trade integration across countries, both at the firm level through international sales of businesses and at the macro-economic level through bilateral trade links. More generally, there is a positive association between international stock market comovement and the degree to which markets are integrated. Second, at high frequency, regional financial centers and the global business cycle play an important role in the transmission of shocks to emerging markets. Third, long-run factors, such as convergence in the sectoral composition across countries, and financial innovations, such as cross-listings and ADRs, are playing an important role in the increasing synchronization of financial markets and real activity. A detailed summary of the conference as well as a general discussion of key issues, in addition to the papers, presentations, and the discussions, are available at the global linkages web page: http://web.mit.edu/kjforbes/www/GL-Website/index.htm. The list of conference papers follows:
Firm-Level Evidence on International Stock Market Comovement
Robin Brooks (IMF) and Marco Del Negro (Federal Reserve Bank of Atlanta)
A Decomposition of Global Linkages in Financial Markets over Time
Kristin Forbes (MIT) and Menzie Chinn (University of California, Santa Cruz)
The Center and the Periphery: The Globalization of Financial Turmoil
Graciela Kaminsky (George Washington University) and Carmen Reinhart (IMF)
U.S. Investors’ Emerging Market Equity Portfolios: A Security-Level Analysis
Hali Edison (IMF) and Frank Warnock (Federal Reserve Board)
Are Daily Cross-Border Equity Flows Pushed or Pulled?
John Griffin (Arizona State University), Federico Nardari (Arizona State University), and René Stulz (Ohio State University)
Time Varying Synchronicity in Individual Stock Returns: A Cross-Country Comparison
Randall Morck (University of Alberta) and Bernard Yeung (New York University)
The Role of ADRs in the Development and Integration of Emerging Equity Markets
G. Andrew Karolyi (Ohio State University)
Trade, Finance, Specialization and Synchronization
Jean Imbs (London Business School)
Understanding the Evolution of World Business Cycles
M. Ayhan Kose (IMF), Christopher Otrok (University of Virginia), and Charles Whiteman (University of Iowa)
Long-Term Global Market Correlations
K. Geert Rouwenhorst (Yale University), William Goetzmann (Yale University), and Lingfeng Li (Yale University)
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