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Spillover Effects of the U.S. Financial Crisis on Financial Markets in Emerging Asian Countries

Listed author(s):
  • Bong-Han Kim
  • Hyeongwoo Kim
  • Bong-Soo Lee

We examine spillover effects of the recent U.S. financial crisis on five emerging Asian countries by estimating conditional correlations of financial asset returns across countries using multivariate GARCH models. We propose a novel approach that simultaneously estimates the conditional correlation coefficient and the effects of its determining factors over time, which can be used to identify the channels of spillovers. We find some evidence of financial contagion around the collapse of Lehman Brothers in September 2008. We further find a dominant role of foreign investment for the conditional correlations in international equity markets. The dollar Libor-OIS spread, the sovereign CDS premium, and foreign investment are found to be significant factors affecting foreign exchange markets.

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File URL: http://cla.auburn.edu/econwp/Archives/2012/2012-06.pdf
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Paper provided by Department of Economics, Auburn University in its series Auburn Economics Working Paper Series with number auwp2012-06.

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Date of creation: Oct 2012
Handle: RePEc:abn:wpaper:auwp2012-06
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