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Endogenous Contagion - A Panel Data Analysis

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  • Dirk Baur

    ()

  • Renee Fry

    ()

Abstract

This paper poses a multivariate test for contagion that distinguishes between vulnerability, positive and negative contagion. The model proides a time series of contagion with which the existence, severity and significance of crisis periods can be endogenously determined. Eleven stock markets from the Asian regions are analyzed during the Asian crisis, and contagion is significant in four periods. These episodes are split equally between positive and negative movements. Anecdotal evidence is matched to significant contagion, with events surrounding Hong Kong and the key drivers.

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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2006-09.

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Length: 44 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:een:camaaa:2006-09

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  1. Hadi Soesastro & M. Chatib Basri, 1998. "Survey of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 34(1), pages 3-54.
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  3. Kee-Hong Bae & G. Andrew Karolyi & Rene M. Stulz, 2000. "A New Approach to Measuring Financial Contagion," NBER Working Papers 7913, National Bureau of Economic Research, Inc.
  4. Marcel Fratzscher, 2003. "On currency crises and contagion," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 8(2), pages 109-129.
  5. Graciela L. Kaminsky & Sergio L. Schmukler, 1999. "What triggers market jitters: a chronicle of the Asian crisis," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 634, Board of Governors of the Federal Reserve System (U.S.).
  6. M. Hashem Pesaran & Andreas Pick, 2004. "Econometric Issues in the Analysis of Contagion," CESifo Working Paper Series 1176, CESifo Group Munich.
  7. Giancarlo Corsetti & Marcello Pericoli & Massimo Sbracia, 2001. "Correlation Analysis of Financial Contagion: What One Should Know before Running a Test," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 408, Bank of Italy, Economic Research and International Relations Area.
  8. Eichengreen, Barry & Rose, Andrew & Wyplosz, Charles, 1996. " Contagious Currency Crises: First Tests," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 98(4), pages 463-84, December.
  9. Geert Bekaert & Campbell R. Harvey & Angela Ng, 2005. "Market Integration and Contagion," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 78(1), pages 39-70, January.
  10. Rigobon, Roberto, 2003. "On the measurement of the international propagation of shocks: is the transmission stable?," Journal of International Economics, Elsevier, Elsevier, vol. 61(2), pages 261-283, December.
  11. Longin, Francois & Solnik, Bruno, 1995. "Is the correlation in international equity returns constant: 1960-1990?," Journal of International Money and Finance, Elsevier, Elsevier, vol. 14(1), pages 3-26, February.
  12. Luci Ellis & Eleanor Lewis, 2001. "The Response of Financial Markets in Australia and New Zealand to News about the Asian Crisis," RBA Research Discussion Papers, Reserve Bank of Australia rdp2001-03, Reserve Bank of Australia.
  13. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, American Finance Association, vol. 57(5), pages 2223-2261, October.
  14. Corsetti, Giancarlo & Pericoli, Marcello & Sbracia, Massimo, 2005. "'Some contagion, some interdependence': More pitfalls in tests of financial contagion," Journal of International Money and Finance, Elsevier, Elsevier, vol. 24(8), pages 1177-1199, December.
  15. Baur, Dirk & Schulze, Niels, 2005. "Coexceedances in financial markets--a quantile regression analysis of contagion," Emerging Markets Review, Elsevier, Elsevier, vol. 6(1), pages 21-43, April.
  16. Favero, Carlo A. & Giavazzi, Francesco, 2002. "Is the international propagation of financial shocks non-linear?: Evidence from the ERM," Journal of International Economics, Elsevier, Elsevier, vol. 57(1), pages 231-246, June.
  17. Jomo, K S, 1998. "Malaysian Debacle: Whose Fault?," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 22(6), pages 707-22, November.
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Citations

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Cited by:
  1. Thomas Lagoarde-Segot & Brian Lucey, 2006. "Financial Contagion in Emerging Markets: Evidence from the Middle East and North Africa," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp114, IIIS.
  2. Mardi Dungey & Renée Fry & Vance L. Martin, 2006. "Correlation, Contagion, and Asian Evidence," Asian Economic Papers, MIT Press, MIT Press, vol. 5(2), pages 32-72, June.
  3. Baur, Dirk G. & Fry, Renée A., 2009. "Multivariate contagion and interdependence," Journal of Asian Economics, Elsevier, Elsevier, vol. 20(4), pages 353-366, September.

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