Evidences of Interdependence and Contagion using a Frequency Domain Framework

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Evidences of Interdependence and Contagion using a Frequency Domain Framework

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Bodart,Vincent
Candelon,Bertrand (METEOR)

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Abstract

The purpose of this paper is to propose a new measure of contagion. Our approach to testing contagion is based on the frequency analysis of causality developed recently by Breitung and Candelon (2004). This approach handles, in a unified framework, several of the statistical problems identified in the literature. It also permits clear differentiation between temporary and permanent shifts in cross-market linkages: the first case is contagion while the second one is simply a measure of interdependence among markets. In examining the ”Tequila” and Asian crises, we find evidence for contagion during both. It also turns out that during the Asian crisis both contagion and higher interdependence have contributed simultaneously to the diffusion of the crisis in Asia. The spillover effects of these crises have been geographically limited to the region where the shock originated.

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Paper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 024.

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Date of creation: 2005
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Handle: RePEc:dgr:umamet:2005024

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Keywords: macroeconomics ;

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Article
- Bodart, Vincent & Candelon, Bertrand, 2009. "Evidence of interdependence and contagion using a frequency domain framework," Emerging Markets Review, Elsevier, vol. 10(2), pages 140-150, June. [Downloadable!] (restricted)

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-09-29 (All new papers)
NEP-ETS-2005-09-29 (Econometric Time Series)
NEP-FMK-2005-09-29 (Financial Markets)
NEP-MAC-2005-09-29 (Macroeconomics)

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Other versions:
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