Romanian Capital Market in a Globalized World

Globalization is a central topic in the financial literature, as its impact observed or estimated on local economies is sometimes invalidated by the macroeconomic variables. The positive effects induced by globalization are usually closely followed by several preconditions of the future crisis, leading to an exposure of less developed economies to shocks induced by globalized markets. In this article, we use the daily returns of 12 capital markets - developed, emergent and frontier markets (mainly from the Central and Eastern Europe), between January 1st, 2007-March, 17th, 2017, in order to reveal the impact that turbulences on these markets have on the Romanian capital market. We use VAR models to capture the impact the developed capital markets have on the less developed Romanian capital market. The obtained results show the major influence that the developed capital markets, especially the US capital market, have on the volatility of the daily returns from the Romanian capital market. This result emphasizes the need for a reform of the Romanian capital market, in order to better fulfill its role as a financing venue for the Romanian companies.JEL Classification: C13, C22, C58, D53, G01, G1