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The Asian Crisis Contagion: A Dynamic Correlation Approach Analysis

  • Essahbi Essaadi


    (Unité d'Analyse Quantitative Appliquée (UAQUAP)-ISG, Tunisie and GATE-Lyon 2 (UMR 5824 CNRS))

  • Jamel Jouini


    (F.S.E.G.N., E.S.S.A.I. and L.E.G.I., Université 7 Novembre de Carthage, Tunisie, GREQAM, Université de la Méditerranée, France)

  • Wajih Khallouli


    (Unité d'Analyse Quantitative Appliquée (UAQUAP) and ESSEC, Université de Tunis, Tunisie)

In this paper we are testing for contagion caused by the Thai baht collapse of July 1997. In line with earlier work, shift-contagion is defined as a structural change within the international propagation mechanisms of financial shocks. We adopt Bai and Perrons (1998) structural break approach in order to detect the endogenous break points of the pair-wise time-varying correlations between Thailand and seven Asian stock market returns. Our approach enables us to solve the misspecification problem of the crisis window. Our results illustrate the existence of shift-contagion in the Asian crisis caused by the crisis in Thailand.

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Article provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.

Volume (Year): 56 (2009)
Issue (Month): 2 (June)
Pages: 241-260

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Handle: RePEc:voj:journl:v:56:y:2009:i:2:p:241-260
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