We examine empirically the episode of extraordinary turbulence in global financial markets during 1998. The analysis focuses on the market assessment of credit risk captured by daily movements in bond spreads for twelve countries. A dynamic latent factor model is estimated using indirect...

Asset market interconnectedness can give rise to significant contagion risks during periods of financial crises that extend beyond the risks associated with changes in volatilities and correlation. These channels include the transmission of shocks operating through changes in the higher order...

An old and unanswered question is: how does monetary policy work? This paper contributes to a growing recent literature that tries to quantify the first step of the process. These studies use daily data to estimate the response of security prices-bond yields and equity returns - to exogenous...