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This paper examines volatility spillovers from mature to emerging stock markets and tests for changes in the transmission mechanism-contagion-during turbulences in mature markets. Tri-variate GARCH-BEKK models of returns in global (mature), regional, and local markets are estimated for 41 emerging market economies (EMEs), with a dummy capturing parameter shifts during turbulent episodes. LR tests suggest that mature markets influence conditional variances in many emerging markets. Moreover, spillover parameters change during turbulent episodes. Conditional variances in most EMEs rise during these episodes, but there is only limited evidence of shifts in conditional correlations between mature and emerging markets.

Finance: General --- Financial Risk Management --- Macroeconomics --- General Financial Markets: General (includes Measurement and Data) --- Externalities --- Financial Crises --- Finance --- Economic & financial crises & disasters --- Emerging and frontier financial markets --- Stock markets --- Spillovers --- Financial crises --- Securities markets --- Financial services industry --- Stock exchanges --- International finance --- Capital market --- Hong Kong Special Administrative Region, People's Republic of China

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This paper examines linkages across North America by estimating the size of spillovers from the major regions of the world-the United States, euro area, Japan, and the rest of the world-to Canada and Mexico, and decomposing the impact of these spillovers into trade, commodity price, and financial market channels. For Canada, a one percent shock to U.S. real GDP shifts Canadian real GDP by some ¾ of a percentage point in the same direction- with financial spillovers more important than trade in recent decades. Thus, a large proportion of the reduction in Canadian output volatility since the 1980s can be accounted for by the "Great Moderation" in U.S. growth. Before 1996, domestic volatility in Mexico swamped the contribution of external factors to the business cycle. After 1996, the response of Mexican GDP is 1½ times the size of the U.S. shock-"when the U.S. sneezes, Mexico catches a cold". These spillovers are transmitted through both trade and financial channels.

Commerce --- Business & Economics --- International Commerce --- Canada. --- Canada --- United States --- Mexico --- Foreign economic relations --- Economic conditions. --- Economic conditions --- Econometrics --- Exports and Imports --- Macroeconomics --- Externalities --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Commodity Markets --- Trade Policy --- International Trade Organizations --- Econometrics & economic statistics --- Economic growth --- International economics --- Spillovers --- Vector autoregression --- Business cycles --- Commodity prices --- North American Free Trade Agreement --- International finance --- Prices --- Commercial treaties

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The spillovers from the U.S. economy to Canada have been assessed. It uses structural vector autoregressions to analyze the role of financial linkages in real and financial spillovers from the United States to Canada. The implications of Canada’s predictable price level have been analyzed. Innovative small and medium-size enterprises have significantly greater difficulty in obtaining financing, reflecting reluctance by the banks to price risk. Canada has sufficiently flexible labor markets to absorb significant sectoral shocks without creating a high level of frictional unemployment.

Banks and Banking --- Inflation --- Macroeconomics --- Money and Monetary Policy --- Industries: Financial Services --- Labor --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Externalities --- Price Level --- Deflation --- Monetary Policy --- Labor Economics: General --- Demand and Supply of Labor: General --- Banking --- Finance --- Monetary economics --- Labour --- income economics --- Spillovers --- Inflation targeting --- Financial sector policy and analysis --- Prices --- Monetary policy --- Labor markets --- International finance --- Banks and banking --- Labor economics --- Labor market --- Canada --- Income economics