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Financial spillovers from the US financial markets to the emerging markets during the subprime crisis: the example of Indian equity markets

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Abstract

This paper provides evidence of spillover effects from the Indian to the US financial markets. We use VAR and Kalman filter analysis to assess the influence of financial stress indicators like the LIBOR-OIS, CDS, the S&P 500 volatility and the exchange rate of the rupee against the Dollar on two indicators of financial stress in India, namely the illiquidity of stock indices and their volatility. We conduct an analysis bases on both daily and monthly frequency and use a database that consists of both aggregate and disaggregated indexes. Our results points to a signification contagion effect after the period following the Lehman Brothers collapse.

Suggested Citation

  • Gilles Dufrénot & Benjamin Keddad & Alain Sand-Zantman, 2010. "Financial spillovers from the US financial markets to the emerging markets during the subprime crisis: the example of Indian equity markets," Documents de Travail de l'OFCE 2010-34, Observatoire Francais des Conjonctures Economiques (OFCE).
    • Handle: RePEc:fce:doctra:1034
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    1. Nathaniel Frank & Heiko Hesse, 2009. "Financial Spillovers to Emerging Markets during the Global Financial Crisis," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(6), pages 507-521, December.
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    6. 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, vol. 24(8), pages 1177-1199, December.
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    More about this item

    Keywords

    Subprime crisis; Emerging Markets; VAR analysis; financial stress;
    All these keywords.

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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