Date of Graduation


Document Type


Degree Name

Doctor of Philosophy in Economics (PhD)

Degree Level





Raja Kali

Committee Member

Javier A. Reyes

Second Committee Member

Gary D. Ferrier


Social sciences, Financial contagion, Financial development, Financial markets, International finance, International trade, Networks in economics


The dissertation consists of three papers exploring the macroeconomic implications of heterogeneity of countries in financial development, economic interconnectedness via trade and financial linkages.

Chapter 1 examines whether countries which are more centrally located in the global trade network have more synchronized stock markets. Global trade data is used to construct a novel measure of random walk betweenness centrality (RWBC), measuring the extent to which a country lies on random pathways in-between other countries and is therefore likely to be a conduit in the transmission of a shock across global markets. Based on a panel dataset of 58 countries over the period 1990-2000, the study finds that higher centrality of a country in the world trade network is indeed associated with greater stock market synchronicity, ceteris paribus.

Chapter 2 uses aggregate macroeconomic experiences of 118 countries over the period 1994-2008 to establish benchmark relationships between macroeconomic fundamentals and levels of financial development of the banking sector, equity markets, and private bond markets. The analysis quantifies the extent to which de-facto financial development of emerging market economies (EMEs) deviates from the levels predicted by their macroeconomic stance. While financial markets in Latin American EMEs are found to be well aligned with their macroeconomic fundamentals, Asian EMEs exceed their reference levels, and European EMEs are found to be systematically financially underdeveloped. No support is found for the argument that these misalignments are caused by heterogeneity in institutional development.

Finally, chapter 3 studies the properties and evolution of the product space--a network of relatedness between products. We use bilateral trade data for 187 countries to construct the product space and export specialization of individual countries over the period 1965--2000. The study shows that the product space changed significantly during the 20th century and represents a highly uneven core-periphery structure. The highly interconnected core consists of three industries--chemicals, industrial machinery, and crude materials, each forming around 20% of all linkages. Product synergies that these "commanding heights" industries yield are strategically important for industrialization policies. Regression analysis confirms that specialization in these industries is associated with higher real income levels.