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The large country effect, contagion and spillover effects in the GCC

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  • Osman Suliman
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    Abstract

    This article examines contagion and crisis propagation (spillovers) in the Gulf Cooperation Council (GCC) economies over the period 1960 to 2002. It also examines whether contagion occurred in Saudi Arabia (large country) after the 1987 US stock market crash and the 1997 Thai exchange rate devaluation and whether these contagion shocks spillover to smaller countries of the region. Spillovers are likely to occur among interdependent countries within the same geographical region. Tests based on correlation coefficients, ARCH/GARCH estimates and direct change (generalized least squares regression) propagation effects indicate that contagion from the US stock market crash and the Thai devaluation occurred in Saudi Arabia, and these external shocks were propagated to smaller GCC countries. This suggests that GCC countries are likely to mitigate such propagations through economic integration. Thus, the idea of GCC formation may help insulate Gulf economies against crisis propagation.

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    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/13504851003614138&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

    Volume (Year): 18 (2011)
    Issue (Month): 3 ()
    Pages: 285-294

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    Handle: RePEc:taf:apeclt:v:18:y:2011:i:3:p:285-294

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    Cited by:
    1. Takagi, Shinji, 2012. "Establishing Monetary Union in the Gulf Cooperation Council: What Lessons for Regional Cooperation?," ADBI Working Papers 390, Asian Development Bank Institute.
    2. A. Maghyereh & B. Awartani, 2012. "Return and volatility spillovers between Dubai financial market and Abu Dhabi Stock Exchange in the UAE," Applied Financial Economics, Taylor & Francis Journals, vol. 22(10), pages 837-848, May.

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