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Financial contagion and the real economy

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  • Baur, Dirk G.

Abstract

This paper studies the spread of the Global Financial Crisis of 2007–2009 from the financial sector to the real economy by examining ten sectors in 25 major developed and emerging stock markets. The analysis tests different channels of financial contagion across countries and sectors and finds that the crisis led to an increased co-movement of returns among financial sector stocks across countries and between financial sector stocks and real economy stocks. The results demonstrate that no country and sector was immune to the adverse effects of the crisis limiting the effectiveness of portfolio diversification. However, there is clear evidence that some sectors in particular Healthcare, Telecommunications and Technology were less severely affected by the crisis.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 36 (2012)
Issue (Month): 10 ()
Pages: 2680-2692

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Handle: RePEc:eee:jbfina:v:36:y:2012:i:10:p:2680-2692

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Web page: http://www.elsevier.com/locate/jbf

Related research

Keywords: Contagion; Sector-specific contagion; Financial crisis; Financial crisis identification;

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References

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  1. Markwat, Thijs & Kole, Erik & van Dijk, Dick, 2009. "Contagion as a domino effect in global stock markets," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 1996-2012, November.
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  7. Baur, Dirk & Jung, Robert C., 2006. "Return and volatility linkages between the US and the German stock market," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 598-613, June.
  8. Vance L. Martin & Brenda Gonzalez-Hermosillo, & Mardi Dungey & Renee A. Fry, 2004. "Empirical Modelling of Contagion: A Review of Methodologies," Econometric Society 2004 Australasian Meetings 243, Econometric Society.
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  13. Dungey, Mardi & Milunovich, George & Thorp, Susan, 2010. "Unobservable shocks as carriers of contagion," Journal of Banking & Finance, Elsevier, vol. 34(5), pages 1008-1021, May.
  14. John Taylor & John Williams, 2008. "Further Results on a Black Swan in the Money Market," Discussion Papers 07-046, Stanford Institute for Economic Policy Research.
  15. Baur, Dirk G. & Fry, Renée A., 2009. "Multivariate contagion and interdependence," Journal of Asian Economics, Elsevier, vol. 20(4), pages 353-366, September.
  16. Baur, Dirk & Schulze, Niels, 2005. "Coexceedances in financial markets--a quantile regression analysis of contagion," Emerging Markets Review, Elsevier, vol. 6(1), pages 21-43, April.
  17. Rodriguez, Juan Carlos, 2007. "Measuring financial contagion: A Copula approach," Journal of Empirical Finance, Elsevier, vol. 14(3), pages 401-423, June.
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Citations

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Cited by:
  1. Dimitris Kenourgios & Dimitrios Dimitriou, 2014. "Contagion Effects of the Global Financial Crisis in US and European Real Economy Sectors," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(3), pages 275-288, June.
  2. Dungey, Mardi & Gajurel, Dinesh, 2014. "Equity market contagion during the global financial crisis: Evidence from the world's eight largest economies," Economic Systems, Elsevier, vol. 38(2), pages 161-177.
  3. Podlich, Natalia & Wedow, Michael, 2011. "Credit contagion between financial systems," Discussion Paper Series 2: Banking and Financial Studies 2011,15, Deutsche Bundesbank, Research Centre.
  4. Philippas, Dionisis & Siriopoulos, Costas, 2013. "Putting the “C” into crisis: Contagion, correlations and copulas on EMU bond markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 161-176.
  5. Rodrigo César de Castro Miranda & Benjamin Miranda Tabak & Mauricio Medeiros Junior, 2012. "Contagion in CDS, Banking and Equity Markets," Working Papers Series 293, Central Bank of Brazil, Research Department.
  6. M. Kabir Hassan & William J. Hippler III, 2013. "The Pronounced Impact of Macroeconomic Stress on the Financial Sector: Implications for Real Sector Growth," NFI Working Papers 2013-WP-01, Indiana State University, Scott College of Business, Networks Financial Institute.
  7. Dimitriou, Dimitrios & Kenourgios, Dimitris, 2013. "Financial crises and dynamic linkages among international currencies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 319-332.
  8. Mark Mink & Jochen Mierau, 2009. "Measuring Stock Market Contagion with an Application to the Sub-prime Crisis," DNB Working Papers 217, Netherlands Central Bank, Research Department.
  9. Hoffmann, Arvid O.I. & Post, Thomas & Pennings, Joost M.E., 2013. "Individual investor perceptions and behavior during the financial crisis," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 60-74.
  10. Ahmad, Wasim & Sehgal, Sanjay & Bhanumurthy, N.R., 2013. "Eurozone crisis and BRIICKS stock markets: Contagion or market interdependence?," Economic Modelling, Elsevier, vol. 33(C), pages 209-225.
  11. Renée Fry-McKibbin & Cody Hsiao & Chrismin Tang, 2014. "Contagion and Global Financial Crises: Lessons from Nine Crisis Episodes," Open Economies Review, Springer, vol. 25(3), pages 521-570, July.
  12. Dimitriou, Dimitrios & Kenourgios, Dimitris & Simos, Theodore, 2013. "Global financial crisis and emerging stock market contagion: A multivariate FIAPARCH–DCC approach," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 46-56.

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