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Shocks And Systemic Influences: Contagion In Global Equity Markets In 1998

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Author Info
Mardi Dungey ()
Renee Fry ()
Brenda Gonzales-Hermosillo
Vance L. Martin

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Abstract

The transmission of the financial crises in 1998 though international equity markets is estimated through a multi-factor model of financial markets specifically allowing for contagion effects. The application measures the strength of contagion emanating from the Russia crisis of 1998, and the LTCM near collapse, using a panel of 10 emerging and developed financial markets. Pre and post default periods for Russia are distinguished. The results show that contagion is significant and widespread from both crises, although the LTCM crises has more impact on developed than emerging markets. Consisten with the existing literature, regional effects are found to be strong during financial crises. Asian markets are found to be relatively immune from contagion, perhaps reflecting the effect of their own recent crisis.

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Paper provided by Australian National University, Centre for Applied Macroeconomic Analysis in its series CAMA Working Papers with number 2005-15.

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Length: 33 pages
Date of creation: Jun 2005
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Handle: RePEc:acb:camaaa:2005-15

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C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
F31 - International Economics - - International Finance - - - Foreign Exchange

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