Financial market spillovers in transition economies

This paper examines financial market comovements across European transition economies and compares their experience to that of other regions. Correlat ions in monthly indices of exchange market pressures can partly be explaine d by direct trade linkages, but not by measures of other fundamentals. High er-frequency data during three crisis periods reveals the presence of struc tural breaks in the relationship between exchange-, but not stock markets. While the reaction of markets during the Asian and Czech crises is muted, t he pattern of high-frequency spillovers during the Russian crisis looks ver y similar to that observed in other regions during turbulent times. With gr eater financial market integration, the financial markets of the more advan ced transition economies can be expected to behave more and more like their Asian and Latin American counterparts.