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Spatial financial contagion during the COVID-19 outbreak: Local correlation approach

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  • Zorgati, Imen
  • Garfatta, Riadh

Abstract

The purpose of this paper is to examine the effect of spatial proximity on financial contagion during the COVID-19 outbreak. We use the daily stock index series of Asian, American, and European countries from January 1, 2014 to January 30, 2021. Two groups of countries are considered: the first includes China and geographically close countries, namely Taiwan, Hong Kong, Singapore, India, Australia, Indonesia, Malaysia, South Korea, Singapore, Vietnam and Russia. The second group includes countries that are geographically distant from China: the United States, Brazil, Mexico, Argentina, Italy, France and Germany. Using local correlation measurement and polynomial regressions, we show that the spatial contagion effect exists between China and geographically distant countries. However, this effect is absent for geographically close countries (Taiwan, Vietnam and Hong Kong).

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  • Zorgati, Imen & Garfatta, Riadh, 2021. "Spatial financial contagion during the COVID-19 outbreak: Local correlation approach," The Journal of Economic Asymmetries, Elsevier, vol. 24(C).
    • Handle: RePEc:eee:joecas:v:24:y:2021:i:c:s1703494921000281
    DOI: 10.1016/j.jeca.2021.e00223
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    More about this item

    Keywords

    COVID-19 outbreak; Spatial proximity; Contagion; Local correlation;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G01 - Financial Economics - - General - - - Financial Crises

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