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International financial contagion of the US sub-prime crisis: evidence through the adjusted correlation test and non-linear Error Correction Models (ECM)

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  • Anis Omri
  • Sonia Ghorbel-Zouari

Abstract

In this essay, we test the presence of the contagion phenomenon during the US sub-prime crisis. We adopt the test of adjusted correlation coefficients between markets and propose a new procedure which involves testing the non-linearity of the propagation mechanisms shocks, estimated with a model of long-term interdependence. We apply this methodology to the financial markets which measure the risk perception. Our results conclude "some contagion, some interdependence" between the financial markets of USA, France, Germany, Japan and UK during the current crisis.

Suggested Citation

  • Anis Omri & Sonia Ghorbel-Zouari, 2011. "International financial contagion of the US sub-prime crisis: evidence through the adjusted correlation test and non-linear Error Correction Models (ECM)," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 4(2), pages 135-149.
    • Handle: RePEc:ids:ijmefi:v:4:y:2011:i:2:p:135-149
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    Cited by:

    1. Chunxiu, Ma & Masih, Mansur, 2014. "Contagion Effects of US Subprime Crisis on ASEAN-5 Stock Markets: Evidence from MGARCH-DCC Application," MPRA Paper 57004, University Library of Munich, Germany.
    2. Anis Omri & Mohamed Frikha, 2011. "No Contagion, Only Interdependence During the US Sub-Primes Crisis," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 18(2), pages 286-298, December.

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