"The Role of International Institutional Investors and Banks in the Transmission of Financial Crises"

We study the role of international institutional investors (e.g., banks, mutual funds, other institutional investors) in propagating financial market instability and on the mediating role of the banking sector. We show that how the turmoil in one class of assets trade in a geographical region propagates to other classes of assets in other regions. We provide evidence that the transmission is directly affected by the investment horizon of the investors and by the degree of integration in the lending markets. Transmission is stronger in the case of prevalence of short term investors and in the case of scarce integration in the lending market.