Keun Lee,  Seoul National University: This paper analyzes the propagation of shocks originating in the United States and Japan into countries of emerging Asia (EA) in terms of five asset classes. It compares the scale and nature of spillovers during the 2008–09 global financial crisis (GFC), the 2013 “taper tantrum” (TT), and the ongoing COVID-19 pandemic. All three events have important and interesting implications for future economic management in Asia.

Although the paper applies a conventional statistical technique to analyze the three episodes of economic disruption, it would have been better if the paper had started with a priori hypotheses derived from some theoretical reasoning instead of neglecting it. The starting point for such hypothesizing could have been either of the following two considerations. First, this paper could have started by considering the possibility that different shocks would generate different patterns of spillover across these five types of assets. Second, given that EA includes a diverse range of countries (e.g., Korea and India), with each at a different level of development or macro-financial openness and integration, this paper could have hypothesized about different impacts of the crises on the same asset in each country.

Having said this, one methodological issue is how to define and operationalize a crisis. Certainly, the GFC and TT are different in nature—the former was an unplanned break-out of a crisis while the latter was a policy action by the Fed. Such a fundamental difference should have led to different patterns in spillover, but this key aspect not only was not analyzed but also not discussed in the interpretation of the results.

Further, the GFC was immediately followed by extraordinarily strong macro-stabilization measures across the world, rendering economic outcomes to reflect both GFC and dramatic policy reactions like the quantitative easing (QE) in 2009. QE is rather similar to TT, whereas GFC is different. So, unless an analyst could separate these two intertwined events, they cannot interpret correctly the results of the analysis, namely, what is the pure effect of the GFC separated from QE.

In addition, informed readers would wonder what kinds of shock had originated from Japan, when the paper had identified only non-Japan shocks as its focus. Two shocks (GFC and TT) originated in the United States, and COVID-19 first broke out contagiously in China. As this paper claims to analyze different shocks from the United States and from Japan, it should also be able to hypothesize about the differences in possible impacts, and in the nature of the spillovers.

Now, in terms of analysis, the paper discusses two types of spillover, namely, shock versus volatility spillover. The differences and meaning of these two spillovers are not explained well for the reader, however. Further, the paper importantly uses the term “spillback” from EA to the United States. That requires some theorizing about the possible different nature and degree of these two, spillover versus spillback, which could open up room for a bigger contribution of the paper. I am raising this point because the paper mentions that “it is often problematic to distinguish contagion and spillover from interdependence.” Thus, I wonder what the answer to this issue is (spillover versus interdependence), which is not easy to find in the current version of the paper. Maybe the answer lies in distinguishing and more clearly explaining the differences among the direct, indirect, and dynamic spillovers, which are terms mentioned in the paper.

Last, the paper makes an important statement at the end that “decades of financial liberalization that led to increased integration must have played a role; when crisis struck, contagion more easily ensued. In good times, everyone gained from integration, in bad times collective losses are difficult to avoid.” Such a statement is interesting and should have led the authors to discuss more of the policy implications from the results and findings of the paper. An important policy statement could have been derived if one had focused on the possible difference among the three crises, which is not explored much in the ending part of the paper, to come up with suggestions for macro-stabilization management for future pandemics.

In sum, I find that the paper deals with important and timely issues but that it leaves more questions than it answers. At the same time, I definitely see more room for a potentially bigger contribution if some hypotheses are derived from a priori reasoning (e.g., expected differences in response patterns between GFC and COVID-19 shocks), and if these interpretations are then associated with such theoretical reasoning.