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Testing contagion of the 1997-98 crisis in Asian stock markets with structural breaks and incubation periods

  • Baek, In-Mee
  • Jun, Jongbyung
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    This study tests for the existence of financial contagion, using a method that allows an incubation period before contagion takes effect. We define contagion as an increase in cross-market linkages following shocks. With daily data on Asian stock markets during the 1997-98 crisis, we find significant upward shifts in the linkages between the Asian markets of both crisis and non-crisis countries. The upward shifts are maintained even after controlling for heteroskedasticity and common world and regional factors, providing strong evidence for financial contagion.

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    Article provided by Elsevier in its journal Journal of Asian Economics.

    Volume (Year): 22 (2011)
    Issue (Month): 5 (October)
    Pages: 356-368

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    Handle: RePEc:eee:asieco:v:22:y:2011:i:5:p:356-368
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