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Identifying contagion: A unifying approach

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  • Sewraj, Deeya
  • Gebka, Bartosz
  • Anderson, Robert D.J.

Abstract

We propose a new approach to identify financial contagion. Our method accounts for possible trends in market linkages, and allows a description of the contagion process over the crisis period. Results for a sample of 25 stock markets show that the impact of the 2007–9 crisis on domestic markets from financial shocks originating in the US was largely heterogeneous. Markets are found to experience the crisis differently, regardless of whether these effects are found to be contagious. Contagion was also less common than could be expected based on a more commonly employed model, which assumes constant market interdependencies within subperiods.

Suggested Citation

  • Sewraj, Deeya & Gebka, Bartosz & Anderson, Robert D.J., 2018. "Identifying contagion: A unifying approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 55(C), pages 224-240.
  • Handle: RePEc:eee:intfin:v:55:y:2018:i:c:p:224-240
    DOI: 10.1016/j.intfin.2018.02.012
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    Keywords

    Finance; Risk analysis; Stock markets; Financial contagion; Financial crises;

    JEL classification:

    • G0 - Financial Economics - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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