Testing for financial contagion between developed and emerging markets during the 1997 East Asian crisis
AbstractIn this paper we examine whether during the 1997 East Asian crisis there was any contagion from the four largest economies in the region (Thailand, Indonesia, Korea and Malaysia) to a number of developed countries (Japan, UK, Germany and France). Following Forbes and Rigobon, we test for contagion as a significant positive shift in the correlation between asset returns, taking into account heteroscedasticity and endogeneity bias. Furthermore, we improve on earlier empirical studies by carrying out a full sample test of the stability of the system that relies on more plausible (over) identifying restrictions. The estimation results provide some evidence of contagion, in particular from Japan (the main international lender in the region), which drastically cut its credit lines to the other Asian countries in 1997. Copyright © 2005 John Wiley & Sons, Ltd.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.
Volume (Year): 10 (2005)
Issue (Month): 4 ()
Contact details of provider:
Web page: http://www.interscience.wiley.com/jpages/1076-9307/
Other versions of this item:
- Philip Arestis & Guglielmo Maria Caporale & Andrea Cipollini & Nicola Spagnolo, 2005. "Testing For Financial Contagion Between Developed And Emerging Markets During The 1997 East Asian Crisis," Economics and Finance Discussion Papers 05-08, Economics and Finance Section, School of Social Sciences, Brunel University.
- Philip Arestis & Guglielmo Maria Caporale & Andrea Cipollini, 2003. "Testing for Financial Contagion between Developed and Emerging Markets during the 1997 East Asian Crisis," Economics Working Paper Archive wp_370, Levy Economics Institute, The.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ilan Goldfajn & Taimur Baig, 1999. "Financial market contagion in the Asian crisis," Textos para discussÃ£o 400, Department of Economics PUC-Rio (Brazil).
- Mardi Dungey & Renee Fry & Vance Martin & Brenda GonzÃ¡lez-Hermosillo, 2004.
"Empirical Modeling of Contagion: A Review of Methodologies,"
IMF Working Papers
04/78, International Monetary Fund.
- Mardi Dungey & Renee Fry & Brenda Gonzalez-Hermosillo & Vance Martin, 2005. "Empirical modelling of contagion: a review of methodologies," Quantitative Finance, Taylor and Francis Journals, vol. 5(1), pages 9-24.
- Martin, V. & Dungey & M., 2004. "Empirical Modelling of Contagion: A Review of Methodologies," Econometric Society 2004 Far Eastern Meetings 574, Econometric Society.
- 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.
- King, Mervyn A & Wadhwani, Sushil, 1990.
"Transmission of Volatility between Stock Markets,"
Review of Financial Studies,
Society for Financial Studies, vol. 3(1), pages 5-33.
- Rigobon, Roberto, 2003. "On the measurement of the international propagation of shocks: is the transmission stable?," Journal of International Economics, Elsevier, vol. 61(2), pages 261-283, December.
- Reinhart, Carmen & Kaminsky, Graciela, 2001.
"Bank Lending and Contagion: Evidence from the Asian Crisis,"
7580, University Library of Munich, Germany.
- Graciela L. Kaminsky & Carmen M. Reinhart, 2001. "Bank Lending and Contagion: Evidence from the Asian Crisis," NBER Chapters, in: Regional and Global Capital Flows: Macroeconomics Causes and Consequences, NBER-EASE Volume 10, pages 73-116 National Bureau of Economic Research, Inc.
- Gabriele Fiorentini & Enrique Sentana Iváñez, 1997.
"Identification, estimation and testing of conditionally heteroskedastic factor models,"
Working Papers. Serie AD
1997-22, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Sentana, Enrique & Fiorentini, Gabriele, 2001. "Identification, estimation and testing of conditionally heteroskedastic factor models," Journal of Econometrics, Elsevier, vol. 102(2), pages 143-164, June.
- Sentana, E. & Fiorentini, G., 1997. "Identification, Estimation and Testing of Conditionally Heteroskedastic Factor Model," Papers 9709, Centro de Estudios Monetarios Y Financieros-.
- Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
- Carlo A. Favero & Francesco Giavazzi, 2000. "Looking for Contagion: Evidence from the ERM," NBER Working Papers 7797, National Bureau of Economic Research, Inc.
- Dornbusch, Rudiger & Park, Yung Chul & Claessens, Stijn, 2000. "Contagion: Understanding How It Spreads," World Bank Research Observer, World Bank Group, vol. 15(2), pages 177-97, August.
- Mervyn King & Enrique Sentana & Sushil Wadhwani, 1990.
"Volatiltiy and Links Between National Stock Markets,"
NBER Working Papers
3357, National Bureau of Economic Research, Inc.
- King, Mervyn & Sentana, Enrique & Wadhwani, Sushil, 1994. "Volatility and Links between National Stock Markets," Econometrica, Econometric Society, vol. 62(4), pages 901-33, July.
- Favero, Carlo A & Giavazzi, Francesco, 2000. "Looking for Contagion: the Evidence from the ERM," CEPR Discussion Papers 2591, C.E.P.R. Discussion Papers.
- Edwards, Sebastian & Rigobon, Roberto, 2002. "Currency crises and contagion: an introduction," Journal of Development Economics, Elsevier, vol. 69(2), pages 307-313, December.
- Mardi Dungey & Diana Zhumabekova, 2001. "Testing for contagion using correlations: some words of caution," Pacific Basin Working Paper Series 01-09, Federal Reserve Bank of San Francisco.
- Marcello Pericoli & Massimo Sbracia, 2001.
"A Primer on Financial Contagion,"
Temi di discussione (Economic working papers)
407, Bank of Italy, Economic Research and International Relations Area.
- Taimur Baig & Ilan Goldfajn, 1998. "Financial Market Contagion in the Asian Crisis," IMF Working Papers 98/155, International Monetary Fund.
- Caporale, Guglielmo Maria & Cipollini, Andrea & Spagnolo, Nicola, 2005. "Testing for contagion: a conditional correlation analysis," Journal of Empirical Finance, Elsevier, vol. 12(3), pages 476-489, June.
- Nistor, Costel & Dumitriu, Ramona & Stefanescu, Razvan, 2012. "Impact of the global crisis on the linkages between CAC 40 and indexes from CEE countries," MPRA Paper 42511, University Library of Munich, Germany, revised 18 Sep 2012.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.