International crises, instability periods and contagion: the case of the ERM
AbstractIn this paper we propose a two step procedure for modelling the propagation of financial shocks. The first step consists in the estimation, by means of SWARCH models, of the conditional probability of being in a period of high volatility while, in the second step such indicators are included in a structural simultaneous models for interdependences among different countries. The results show that episodes of financial crisis effectively happened during periods of high volatility and that such measures of instability are important in explaining the propagation of devaluation expectations between six European Countries during the ERM period.
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Bibliographic InfoArticle provided by Springer in its journal International Review of Economics.
Volume (Year): 56 (2009)
Issue (Month): 2 (June)
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Web page: http://www.springer.com/economics/journal/12232
Other versions of this item:
- Emanuele Bacchiocchi & Marta Bevilacqua, 2008. "International Crisis, Instability Periods and Contagion: The Case of the ERM," UNIMI - Research Papers in Economics, Business, and Statistics unimi-1079, Universitá degli Studi di Milano.
- C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- F3 - International Economics - - International Finance
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