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Financial crises and dynamic linkages across international stock and currency markets

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  • Dua, Pami
  • Tuteja, Divya

Abstract

This paper investigates contagion across stock and currency markets of China, Eurozone, India, Japan and US during global financial crisis and Eurozone crisis. The crisis periods are selected using Markov-switching models for US and Eurozone markets. We, then, utilize the DCC-GARCH model to estimate conditional correlation among the assets and test for contagion/flight to quality effects during the crises. The results show significant contagion as well as flight to quality effects both across and within asset classes. We examine the impact of financial stress index on the correlation across markets and find that portfolio diversification benefits for equity markets may be non-existent.

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  • Dua, Pami & Tuteja, Divya, 2016. "Financial crises and dynamic linkages across international stock and currency markets," Economic Modelling, Elsevier, vol. 59(C), pages 249-261.
  • Handle: RePEc:eee:ecmode:v:59:y:2016:i:c:p:249-261
    DOI: 10.1016/j.econmod.2016.07.013
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    Cited by:

    1. Metelli, Luca & Natoli, Filippo, 2017. "The effect of a Chinese slowdown on inflation in the euro area and the United States," Economic Modelling, Elsevier, vol. 62(C), pages 16-22.
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    4. Tadeusz Klecha & Daniel Kosiorowski & Dominik Mielczarek & Jerzy P. Rydlewski, 2018. "New Proposals of a Stress Measure in a Capital and its Robust Estimator," Papers 1802.03756, arXiv.org.
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    8. repec:eee:dyncon:v:91:y:2018:i:c:p:469-484 is not listed on IDEAS

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