IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Empirical modelling of contagion: a review of methodologies

  • Mardi Dungey
  • Renee Fry
  • Brenda Gonzalez-Hermosillo
  • Vance Martin

The existing literature promotes a number of alternative methods to test for the presence of contagion during financial market crises. This paper reviews those methods, and shows how they are related in a unified framework. A number of extensions are also suggested which allow for multivarite testing, endogeneity issues and structural breaks.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.tandfonline.com/doi/abs/10.1080/14697680500142045
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Taylor & Francis Journals in its journal Quantitative Finance.

Volume (Year): 5 (2005)
Issue (Month): 1 ()
Pages: 9-24

as
in new window

Handle: RePEc:taf:quantf:v:5:y:2005:i:1:p:9-24
Contact details of provider: Web page: http://www.tandfonline.com/RQUF20

Order Information: Web: http://www.tandfonline.com/pricing/journal/RQUF20

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Taimur Baig & Ilan Goldfajn, 1998. "Financial Market Contagion in the Asian Crisis," IMF Working Papers 98/155, International Monetary Fund.
  2. Kaminsky, Graciela L. & Schmukler, Sergio L., 1999. "What triggers market jitters? A chronicle of the Asian crisis," Policy Research Working Paper Series 2094, The World Bank.
  3. Reuven Glick & Andrew K. Rose, 1998. "Contagion and trade: why are currency crises regional?," Pacific Basin Working Paper Series 98-03, Federal Reserve Bank of San Francisco.
  4. Reinhart, Carmen & Kaminsky, Graciela, 2000. "Las crisis gemelas: las causas de los problemas bancarios y de balanza de pagos
    [The twin crises: Te causes of banking and balance of payments problems]
    ," MPRA Paper 13842, University Library of Munich, Germany.
  5. Longin, Francois & Solnik, Bruno, 1995. "Is the correlation in international equity returns constant: 1960-1990?," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 3-26, February.
  6. Robert Flood & Nancy Marion, 1998. "Perspectives on the Recent Currency Crisis Literature," NBER Working Papers 6380, National Bureau of Economic Research, Inc.
  7. Grubel, Herbert G & Fadner, Kenneth, 1971. "The Interdependence of International Equity Markets," Journal of Finance, American Finance Association, vol. 26(1), pages 89-94, March.
  8. Robert F. Engle & Takatoshi Ito & Wen-Ling Lin, 1988. "Meteor Showers or Heat Waves? Heteroskedastic Intra-Daily Volatility in the Foreign Exchange Market," NBER Working Papers 2609, National Bureau of Economic Research, Inc.
  9. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1996. "Contagious Currency Crises," CEPR Discussion Papers 1453, C.E.P.R. Discussion Papers.
  10. Rigobon, Roberto, 2002. "The curse of non-investment grade countries," Journal of Development Economics, Elsevier, vol. 69(2), pages 423-449, December.
  11. Chue, Timothy K., 2002. "Time-varying risk preferences and emerging market co-movements," Journal of International Money and Finance, Elsevier, vol. 21(7), pages 1053-1072, December.
  12. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
  13. Mico Loretan & William B. English, 2000. "Evaluating "correlation breakdowns" during periods of market volatility," International Finance Discussion Papers 658, Board of Governors of the Federal Reserve System (U.S.).
  14. Reinhart, Carmen & Kaminsky, Graciela, 2008. "The center and the periphery: The globalization of financial turmoil," MPRA Paper 14100, University Library of Munich, Germany.
  15. McKibbin, Warwick & Marin, Will, 1999. "The East Asian crisis : investigating causes and policy responses," Policy Research Working Paper Series 2172, The World Bank.
  16. Bekaert, Geert & Hodrick, Robert J, 1992. " Characterizing Predictable Components in Excess Returns on Equity and Foreign Exchange Markets," Journal of Finance, American Finance Association, vol. 47(2), pages 467-509, June.
  17. Giancarlo Corsetti & Marcello Pericoli & Massimo Sbracia, 2001. "Correlation Analysis of Financial Contagion: What One Should Know Before Running a Test," Working Papers 822, Economic Growth Center, Yale University.
  18. Van Rijckeghem, Caroline & Weder, Beatrice, 2001. "Sources of contagion: is it finance or trade?," Journal of International Economics, Elsevier, vol. 54(2), pages 293-308, August.
  19. Chernov, Mikhail & Ronald Gallant, A. & Ghysels, Eric & Tauchen, George, 2003. "Alternative models for stock price dynamics," Journal of Econometrics, Elsevier, vol. 116(1-2), pages 225-257.
  20. Laura E. Kodres & Matthew Pritsker, 2002. "A Rational Expectations Model of Financial Contagion," Journal of Finance, American Finance Association, vol. 57(2), pages 769-799, 04.
  21. Roberto Rigobon, 1999. "On the Measurement of the International Propagation of Shocks," NBER Working Papers 7354, National Bureau of Economic Research, Inc.
  22. Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
  23. Andrew Harvey (ed.), 1994. "Time Series," Books, Edward Elgar Publishing, volume 0, number 599, April.
  24. M. Hashem Pesaran & Andreas Pick, 2004. "Econometric Issues in the Analysis of Contagion," CESifo Working Paper Series 1176, CESifo Group Munich.
  25. Guillermo A. Calvo & Enrique G. Mendoza, 1999. "Regional Contagion and the Globalization of Securities Markets," NBER Working Papers 7153, National Bureau of Economic Research, Inc.
  26. Franklin Allen & Douglas Gale, 1998. "Financial Contagion Journal of Political Economy," Center for Financial Institutions Working Papers 98-31, Wharton School Center for Financial Institutions, University of Pennsylvania.
  27. Michael Bordo & Barry Eichengreen, 1999. "Is our Current International Economic Environment Unusually Crisis Prone?," RBA Annual Conference Volume, in: David Gruen & Luke Gower (ed.), Capital Flows and the International Financial System Reserve Bank of Australia.
  28. Nobuhiro Kiyotaki & John Moore, 2002. "Balance-Sheet Contagion," American Economic Review, American Economic Association, vol. 92(2), pages 46-50, May.
  29. Kaminsky, Graciela L. & Reinhart, Carmen M., 2002. "Financial markets in times of stress," Journal of Development Economics, Elsevier, vol. 69(2), pages 451-470, December.
  30. Marcello Pericoli & Massimo Sbracia, 2003. "A Primer on Financial Contagion," Journal of Economic Surveys, Wiley Blackwell, vol. 17(4), pages 571-608, 09.
  31. Renee Fry & Vance Martin & Brenda Gonzalez-Hermosillo & Mardi Dungey, 2002. "International Contagion Effects from the Russian Crisis and the LTCM Near-Collapse," IMF Working Papers 02/74, International Monetary Fund.
  32. Jeanne, Olivier & Masson, Paul, 2000. "Currency crises, sunspots and Markov-switching regimes," Journal of International Economics, Elsevier, vol. 50(2), pages 327-350, April.
  33. Baur, Dirk & Schulze, Niels, 2005. "Coexceedances in financial markets--a quantile regression analysis of contagion," Emerging Markets Review, Elsevier, vol. 6(1), pages 21-43, April.
  34. Paul R. Masson, 1999. "Multiple Equilibria, Contagion, and the Emerging Market Crises," IMF Working Papers 99/164, International Monetary Fund.
  35. Mahieu, Ronald & Schotman, Peter, 1994. "Neglected common factors in exchange rate volatility," Journal of Empirical Finance, Elsevier, vol. 1(3-4), pages 279-311, July.
  36. Kee-Hong Bae & G. Andrew Karolyi & René M. Stulz, 2003. "A New Approach to Measuring Financial Contagion," Review of Financial Studies, Society for Financial Studies, vol. 16(3), pages 717-763, July.
  37. Francis X. Diebold & Marc Nerlove, 1986. "The dynamics of exchange rate volatility: a multivariate latent factor ARCH model," Special Studies Papers 205, Board of Governors of the Federal Reserve System (U.S.).
  38. Luci Ellis & Eleanor Lewis, 2001. "The Response of Financial Markets in Australia and New Zealand to News about the Asian Crisis," RBA Research Discussion Papers rdp2001-03, Reserve Bank of Australia.
  39. Reinhart, Carmen & Kaminsky, Graciela, 1998. "On crises, contagion, and confusion," MPRA Paper 13709, University Library of Munich, Germany.
  40. Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
  41. repec:cup:etheor:v:11:y:1995:i:1:p:122-50 is not listed on IDEAS
  42. Karolyi, G Andrew & Stulz, Rene M, 1996. " Why Do Markets Move Together? An Investigation of U.S.-Japan Stock Return Comovements," Journal of Finance, American Finance Association, vol. 51(3), pages 951-86, July.
  43. Masson, Paul, 1999. "Contagion:: macroeconomic models with multiple equilibria," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 587-602, August.
  44. gulielmo maria caporale & rea cipollini & nicola spagnolo, 2004. "Testing For Contagion: A Conditional Correlation Analysis," International Finance 0406003, EconWPA.
  45. Mardi Dungey & Vance L Martin & Adrian R Pagan, 2000. "A multivariate latent factor decomposition of international bond yield spreads," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(6), pages 697-715.
  46. Favero, Carlo A. & Giavazzi, Francesco, 2002. "Is the international propagation of financial shocks non-linear?: Evidence from the ERM," Journal of International Economics, Elsevier, vol. 57(1), pages 231-246, June.
  47. Butler, K. C. & Joaquin, D. C., 2002. "Are the gains from international portfolio diversification exaggerated? The influence of downside risk in bear markets," Journal of International Money and Finance, Elsevier, vol. 21(7), pages 981-1011, December.
  48. WenShwo Fang & Stephen M. Miller, 2002. "Dynamic Effects of Currency Depreciation on Stock Market Returns during the Asian Financial Crisis," Working papers 2002-31, University of Connecticut, Department of Economics.
  49. Malliaropulos, Dimitrios, 1997. "A multivariate GARCH model of risk premia in foreign exchange markets," Economic Modelling, Elsevier, vol. 14(1), pages 61-79, January.
  50. King, Mervyn A & Wadhwani, Sushil, 1990. "Transmission of Volatility between Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 5-33.
  51. Corsetti, Giancarlo & Pericoli, Marcello & Sbracia, Massimo, 2005. "'Some contagion, some interdependence': More pitfalls in tests of financial contagion," Journal of International Money and Finance, Elsevier, vol. 24(8), pages 1177-1199, December.
  52. Geert Bekaert & Campbell R. Harvey & Angela Ng, 2005. "Market Integration and Contagion," The Journal of Business, University of Chicago Press, vol. 78(1), pages 39-70, January.
  53. Albert S. Kyle, 2001. "Contagion as a Wealth Effect," Journal of Finance, American Finance Association, vol. 56(4), pages 1401-1440, 08.
  54. Toyoda, Toshihisa & Ohtani, Kazuhiro, 1986. "Testing equality between sets of coefficients after a preliminary test for equality of disturbance variances in two linear regressions," Journal of Econometrics, Elsevier, vol. 31(1), pages 67-80, February.
  55. Miller, Merton, 1998. "Asian financial crisis," Japan and the World Economy, Elsevier, vol. 10(3), pages 355-358, July.
  56. Mardi Dungey & Diana Zhumabekova, 2001. "Testing for contagion using correlations: some words of caution," Pacific Basin Working Paper Series 2001-09, Federal Reserve Bank of San Francisco.
  57. Mody, Ashoka & Taylor, Mark P, 2003. "Common Vulnerabilities," CEPR Discussion Papers 3759, C.E.P.R. Discussion Papers.
  58. Carmen M. Reinhart & Sara Calvo, 1996. "Capital Flows to Latin America: Is There Evidence of Contagion Effects?," Peterson Institute Press: Chapters, in: Guillermo A. Calvo & Morris Goldstein & Eduard Hochreiter (ed.), Private Capital Flows to Emerging Markets After the Mexican Crisis, pages 151-171 Peterson Institute for International Economics.
  59. Paul R. Masson, 1998. "Contagion; Monsoonal Effects, Spillovers, and Jumps Between Multiple Equilibria," IMF Working Papers 98/142, International Monetary Fund.
  60. Solnik, Bruno H., 1974. "An equilibrium model of the international capital market," Journal of Economic Theory, Elsevier, vol. 8(4), pages 500-524, August.
  61. Diebold, Francis X & Nerlove, Marc, 1989. "The Dynamics of Exchange Rate Volatility: A Multivariate Latent Factor Arch Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(1), pages 1-21, Jan.-Mar..
  62. Dornbusch, Rudiger & Park, Yung Chul & Claessens, Stijn, 2000. "Contagion: Understanding How It Spreads," World Bank Research Observer, World Bank Group, vol. 15(2), pages 177-97, August.
  63. Tamim Bayoumi & Manmohan S. Kumar & Giorgio Fazio & Ronald MacDonald, 2003. "Fatal Attraction; A New Measure of Contagion," IMF Working Papers 03/80, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:taf:quantf:v:5:y:2005:i:1:p:9-24. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.