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Network analysis of exchange data: interdependence drives crisis contagion

Listed author(s):
  • David Matesanz

    ()

  • Guillermo Ortega

    ()

In this paper, we examine linear and nonlinear co-movements that appear in the real exchange rates of a group of 28 developed and developing countries. The matrix of Pearson correlation and Phase Synchronous coefficients have been used in order to construct a topology and hierarchy of countries by using the Minimum Spanning Tree (MST). In addition, the MST cost and global correlation coefficients have been calculated to observe the co-movements’ dynamics throughout the time sample. By comparing Pearson and Phase Synchronous information, a new methodology is emphasized; one that can uncover meaningful information pertaining to the contagion economic issue and, more generally, the debate surrounding interdependence and/or contagion in financial time series. Our results suggest some evidence of contagion in the Asian currency crises; however, this contagion is driven by previous and stable interdependence. Copyright Springer Science+Business Media Dordrecht 2014

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File URL: http://hdl.handle.net/10.1007/s11135-013-9855-z
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Article provided by Springer in its journal Quality & Quantity.

Volume (Year): 48 (2014)
Issue (Month): 4 (July)
Pages: 1835-1851

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Handle: RePEc:spr:qualqt:v:48:y:2014:i:4:p:1835-1851
DOI: 10.1007/s11135-013-9855-z
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