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A Spatial Modelling Approach to Contagion Among Emerging Economies

  • Harry Kelejian

    ()

  • George Tavlas

    ()

  • George Hondroyiannis

    ()

This paper takes a spatial modelling approach in specifying and testing for contagion among emerging market economies. Our approach enables us to estimate asymmetries such as the magnitude of contagion of one country upon others, as well as how that country in turn is affected, on average, by the events of others. The approach also enables us to test for contagion in a formal, straightforward way and to take account for distance and trade linkages among countries. The results suggest that contagion is a statistically significant factor in foreign exchange markets and, furthermore, its effects are not uniform across the countries considered. Copyright Springer Science + Business Media, LLC 2006

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File URL: http://hdl.handle.net/10.1007/s11079-006-0357-7
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 17 (2006)
Issue (Month): 4 (December)
Pages: 423-441

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Handle: RePEc:kap:openec:v:17:y:2006:i:4:p:423-441
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100323

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  1. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Végh, 2003. "The Unholy Trinity of Financial Contagion," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 51-74, Fall.
  2. Graciela L. Kaminsky & Carmen M. Reinhart, 2001. "Financial Markets in Times of Stress," NBER Working Papers 8569, National Bureau of Economic Research, Inc.
  3. Marcel Fratzscher, 2003. "On currency crises and contagion," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(2), pages 109-129.
  4. Dellas, H. & Stockman, A.C., 1988. "Self-Fullfilling Expectations, Speculative Attacks And Capital Controls," RCER Working Papers 138, University of Rochester - Center for Economic Research (RCER).
  5. Reuven Glick & Andrew K. Rose, 1998. "Contagion and Trade: Why Are Currency Crises Regional?," NBER Working Papers 6806, National Bureau of Economic Research, Inc.
  6. Paul R Masson, 1998. "Contagion; Monsoonal Effects, Spillovers, and Jumps Between Multiple Equilibria," IMF Working Papers 98/142, International Monetary Fund.
  7. Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
  8. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1996. "Contagious Currency Crises," NBER Working Papers 5681, National Bureau of Economic Research, Inc.
  9. Rigobon, Roberto, 2002. "The curse of non-investment grade countries," Journal of Development Economics, Elsevier, vol. 69(2), pages 423-449, December.
  10. Taimur Baig & Ilan Goldfajn, 1999. "Financial Market Contagion in the Asian Crisis," IMF Staff Papers, Palgrave Macmillan, vol. 46(2), pages 3.
  11. Hernandez, Leonardo F. & Valdes, Rodrigo O., 2001. "What drives contagion: Trade, neighborhood, or financial links?," International Review of Financial Analysis, Elsevier, vol. 10(3), pages 203-218.
  12. Corsetti, Giancarlo & Pericoli, Marcello & Sbracia, Massimo, 2002. "Some Contagion, Some Interdependence: More Pitfalls in Tests of Financial Contagion," CEPR Discussion Papers 3310, C.E.P.R. Discussion Papers.
  13. Sebastian Edwards & Raul Susmel, 2001. "Volatility Dependence and Contagion in Emerging Equity Markets," NBER Working Papers 8506, National Bureau of Economic Research, Inc.
  14. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
  15. Christian B. Mulder & Matthieu Bussière, 1999. "External Vulnerability in Emerging Market Economies; How High Liquidity Can Offset Weak Fundamentals and the Effects of Contagion," IMF Working Papers 99/88, International Monetary Fund.
  16. Kaminsky, Graciela L. & Reinhart, Carmen M., 2000. "On crises, contagion, and confusion," Journal of International Economics, Elsevier, vol. 51(1), pages 145-168, June.
  17. Miller, Merton, 1998. "Asian financial crisis," Japan and the World Economy, Elsevier, vol. 10(3), pages 355-358, July.
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