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International propagation of shocks: an evaluation of contagion effects for some Latin American countries

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  • Constanza Martinez
  • Manuel Ramirez

Abstract

In this paper we analyse the spread of shocks across asset markets in eight Latin American countries. First, we measure the extent of market reactions with the principal components analysis, and second, we investiga'te the volatility of asset markets based on ARCH-GARCH models as a function of the principal components retained in the first stage. Our results do not support the existence of financial contagion, but they do support interdependence in most cases along with a slight increase in the sensitivity of markets to recent shocks.

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  • Constanza Martinez & Manuel Ramirez, 2011. "International propagation of shocks: an evaluation of contagion effects for some Latin American countries," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 4(2), pages 213-233, December.
    • Handle: RePEc:taf:macfem:v:4:y:2011:i:2:p:213-233
    DOI: 10.1080/17520843.2010.546361
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    5. Aymen Ben Rejeb, 2013. "Volatility spillovers and contagion: an empirical analysis of structural changes in emerging market volatility," Economics Bulletin, AccessEcon, vol. 33(1), pages 56-71.
    6. Ana Carolina Costa Correa & Tabajara Pimenta Júnior & Luiz Eduardo Gaio, 2018. "Interdependence and asymmetries: Latin American ADRs and developed markets," Brazilian Business Review, Fucape Business School, vol. 15(4), pages 391-409, July.
    7. Mobeen Ur Rehman, 2016. "Financial Contagion in EFA Markets in Crisis Periods: A Multivariate GARCH Dynamic Conditional Correlation Framework," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 21(2), pages 121-151, July-Dec.
    8. Aymen Ben Rejeb & Adel Boughrara, 2015. "Financial integration in emerging market economies: Effects on volatility transmission and contagion," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 15(3), pages 161-179, September.

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    More about this item

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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