Global Financial Risk and Emerging Market Vulnerability

Dr. Guanyi Yang’s peer-reviewed research quantifies how global financial risk shocks transmit to emerging markets and why equity markets can amplify those effects. Focalize Solutions applies the same modeling toolkit to business risk assessment, scenario analysis, and market exposure questions.

BUSINESS

1 min read

At a glance

Type of work: Applied macro-finance research and risk analytics
Lead economist: Guanyi Yang, PhD
Output: Peer-reviewed publication and transferable modeling toolkit
Methods: Structural VAR analysis using global risk measures and country-level macro-financial data

The question

When global financial conditions tighten, emerging markets often face higher borrowing costs, capital outflows, and slower growth. This work asks:

How large are these effects, and what market channels actually drive them?

What the research did

The study measured global financial risk using the U.S. stock market volatility index and estimated how shocks propagate to emerging market outcomes. It used a structural VAR framework and data covering 12 emerging markets over roughly two decades (1999–2019).

A central point of the paper is that equity market dynamics play a larger role than sovereign bond spreads in transmitting risk.

Key findings we emphasize

Global financial risk shocks can affect borrowing costs, investment, and growth in emerging markets.
Countries with larger capital inflows tend to be more vulnerable during global risk events.
Equity returns explain a meaningful share of output and investment fluctuations, with the study reporting contributions up to about 25% in the model’s decomposition.

How Focalize Solutions uses this toolkit in practice

In client work, the same core approach supports questions like:

Risk exposure assessment for markets, sectors, or portfolios
Scenario analysis around volatility, capital flow reversals, and policy shifts
Mechanism-focused analysis that separates what drives outcomes, rather than relying on a single indicator

We translate model outputs into clear implications for decision-makers, including what signals to monitor and which channels matter most.

Work samples

Because this is published research, the original article is available via the journal link in your existing post. We can also share a short methodology note showing how we structure similar analyses for client-facing work.