Evidence of interdependence and contagion using a frequency domain framework
AbstractThis paper proposes a new measure of contagion, based on the frequency analysis of causality developed recently by Breitung and Candelon [Breitung, J., Candelon, B. 2006. Testing for short and long-run causality: a frequency domain approach, Journal of Econometrics, 12, 363-378.]. This approach handles several of the statistical problems identified in the literature. It also permits clear differentiation between temporary and permanent shifts in cross-market linkages: the first case is contagion while the second one is simply a measure of interdependence among markets. With this new approach, we examine the "Tequila" and Asian crises and find evidence of contagion for both. During the Asian crisis, higher interdependence has also contributed to the diffusion of the crisis in Asia.
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Bibliographic InfoArticle provided by Elsevier in its journal Emerging Markets Review.
Volume (Year): 10 (2009)
Issue (Month): 2 (June)
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Web page: http://www.elsevier.com/locate/inca/620356
Contagion Financial crisis Causality test Frequency domain;
Other versions of this item:
- Bodart,Vincent & Candelon,Bertrand, 2005. "Evidences of Interdependence and Contagion using a Frequency Domain Framework," Research Memorandum 024, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
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