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A Spatial Modelling Approach to Contagion Among Emerging Economies

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Author Info

  • Harry Kelejian

    ()

  • George Tavlas

    ()

  • George Hondroyiannis

    ()

Abstract

This paper takes a spatial modelling approach in specifying and testing for contagion among emerging market economies. Our approach enables us to estimate asymmetries such as the magnitude of contagion of one country upon others, as well as how that country in turn is affected, on average, by the events of others. The approach also enables us to test for contagion in a formal, straightforward way and to take account for distance and trade linkages among countries. The results suggest that contagion is a statistically significant factor in foreign exchange markets and, furthermore, its effects are not uniform across the countries considered. Copyright Springer Science + Business Media, LLC 2006

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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 17 (2006)
Issue (Month): 4 (December)
Pages: 423-441

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Handle: RePEc:kap:openec:v:17:y:2006:i:4:p:423-441

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: contagion; currency crises; spatial modelling;

References

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  1. Rigobon, Roberto, 2002. "The curse of non-investment grade countries," Journal of Development Economics, Elsevier, vol. 69(2), pages 423-449, December.
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  6. Reinhart, Carmen & Kaminsky, Graciela, 2002. "Financial markets in time of stress," MPRA Paper 13869, University Library of Munich, Germany.
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  8. Kaminsky, Graciela L. & Reinhart, Carmen M., 2000. "On crises, contagion, and confusion," Journal of International Economics, Elsevier, vol. 51(1), pages 145-168, June.
  9. Edwards, Sebastian & Susmel, Raul, 2001. "Volatility dependence and contagion in emerging equity markets," Journal of Development Economics, Elsevier, vol. 66(2), pages 505-532, December.
  10. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. V�gh, 2003. "The Unholy Trinity of Financial Contagion," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 51-74, Fall.
  11. Taimur Baig & Ilan Goldfajn, 1999. "Financial Market Contagion in the Asian Crisis," IMF Staff Papers, Palgrave Macmillan, vol. 46(2), pages 3.
  12. Dellas, Harris & Stockman, Alan, 1993. "Self-Fulfilling Expectations, Speculative Attack, and Capital Controls," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 25(4), pages 721-30, November.
  13. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, American Finance Association, vol. 57(5), pages 2223-2261, October.
  14. Miller, Merton, 1998. "Asian financial crisis," Japan and the World Economy, Elsevier, Elsevier, vol. 10(3), pages 355-358, July.
  15. Paul R. Masson, 1998. "Contagion," IMF Working Papers 98/142, International Monetary Fund.
  16. Christian B. Mulder & Matthieu Bussière, 1999. "External Vulnerability in Emerging Market Economies," IMF Working Papers 99/88, International Monetary Fund.
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Citations

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Cited by:
  1. Keiler, Sebastian & Eder, Armin, 2013. "CDS spreads and systemic risk: A spatial econometric approach," Discussion Papers 01/2013, Deutsche Bundesbank, Research Centre.
  2. Harry Kelejian, 2014. "Omitted factors and spatial lags in the dependent variable," Letters in Spatial and Resource Sciences, Springer, Springer, vol. 7(1), pages 23-33, March.
  3. Nicolas Debarsy & Cem Ertur, 2009. "Testing for Spatial Autocorrelation in a Fixed Effects Panel Data Model," Post-Print halshs-00414133, HAL.
  4. Georgios Fotopoulos & Helen Louri, 2011. "On the Geography of International Banking: a case for spatial econometrics?," ERSA conference papers ersa10p1081, European Regional Science Association.
  5. Salvatore Dell'Erba & Emanuele Baldacci & Tigran Poghosyan, 2011. "Spatial Spillovers in Emerging Market Spreads," IMF Working Papers 11/221, International Monetary Fund.
  6. Elhorst, J. Paul & Lacombe, Donald J. & Piras, Gianfranco, 2012. "On model specification and parameter space definitions in higher order spatial econometric models," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 211-220.
  7. Peter Claeys & Rosina Moreno & Jordi Suriñach, 2008. "Fiscal policy and interest rates: the role of financial and economic integration," IREA Working Papers 200810, University of Barcelona, Research Institute of Applied Economics, revised Sep 2008.
  8. Lena Tonzer, 2013. "Cross-Border Interbank Networks, Banking Risk and Contagion," FIW Working Paper series 129, FIW.
  9. Tai-kuang Ho & Ming-yen Wu, 2012. "Third-person Effect and Financial Contagion in the Context of a Global Game," Open Economies Review, Springer, Springer, vol. 23(5), pages 823-846, November.
  10. Claeys, Peter & Moreno, Rosina & Suriñach, Jordi, 2012. "Debt, interest rates, and integration of financial markets," Economic Modelling, Elsevier, vol. 29(1), pages 48-59.
  11. Asgharian, Hossein & Hess, Wolfgang & Liu, Lu, 2013. "A spatial analysis of international stock market linkages," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4738-4754.
  12. Kelejian, Harry H. & Murrell, Peter & Shepotylo, Oleksandr, 2013. "Spatial spillovers in the development of institutions," Journal of Development Economics, Elsevier, vol. 101(C), pages 297-315.
  13. Hubert JAYET & Glenn RAYP & Ilse RUYSSEN & Nadiya UKRAYINCHUK, 2014. "Immigrants’ location choice in Belgium," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2014004, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  14. Georgios Fotopoulos & Helen Louri, 2011. "On the geography of international banking: the role of third-country effects," Working Papers 125, Bank of Greece.

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