Financial Market Contagion and Risk Transmission Across Global Economies (OpenAlex (recherche mondiale))

Summary

• Advanced economies recorded lower vulnerability with a Financial Contagion Index (FCI) of 58 and a Risk Transmission Index (RTI) of 55.p.1
• Advanced economies achieved high stability scores, registering a Market Stability Index (MSI) of 82 and an Economic Stability Index (ESI) of 80.p.1
• Emerging economies displayed moderate vulnerability indicators, recording an FCI of 72 and an RTI of 74.p.1
• Emerging economies demonstrated moderate resilience levels, with an MSI of 68 and an ESI of 65.p.1
• Developing economies exhibited the highest exposure to contagion, recording an FCI of 84 and an RTI of 86.p.1
• Developing economies recorded the lowest stability scores, with MSI falling to 51 and ESI to 48.p.1

Key insights

1. Financial market contagion transmits disturbances across borders through capital flows, investor sentiment, exchange rates, interest rates, and banking linkages.p.1
2. Economies with large external financial exposures suffer higher contagion even if initial shocks originate outside their domestic system.p.2
3. The emergence of digital financial instruments and stablecoins creates additional channels for market volatility and collateral risks affecting financial stability.p.2
4. Bank failures can trigger global contagions through investor expectations and cross-border financial market connections.p.3
5. High-frequency market connections reflect fast reactions to financial shocks, whereas low-frequency connections represent persistent structural linkages.p.3
6. Changes in global risk perception can generate a multiplier effect that amplifies the initial financial shock across countries.p.4
7. Market stability increases with strong market liquidity, low volatility, financial system diversification, and effective regulatory systems.p.6