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Interdependence and Contagion: an Analysis of Information Transmission in Latin America's Stock Markets

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  • Angelo Marsiglia Fasolo

Abstract

This paper brings evidences about the hypotheses of financial crisis contagion over Latin American stock markets in the 90's using a multivariate GARCH model. Beside the traditional volatility structure, we added a leverage term like GJR framework in order to avoid problems due to the use of conditional correlation as a measure of relationship between stock markets. The results show the existence of contagion only during the Asian (1997) and the Russian (1998) crises. The consequences of the Brazilian crisis (1999) can be identified as a result of interdependence among Latin American markets, while the crises of Mexico (1994) and Argentina (2001) show a specific mechanism of propagation. This result raises questions about the "contagion" and "interdependence" concepts' adequacy for the analysis of information transmission among stock markets.

Suggested Citation

  • Angelo Marsiglia Fasolo, 2006. "Interdependence and Contagion: an Analysis of Information Transmission in Latin America's Stock Markets," Working Papers Series 112, Central Bank of Brazil, Research Department.
  • Handle: RePEc:bcb:wpaper:112
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    File URL: https://www.bcb.gov.br/pec/wps/ingl/wps112.pdf
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    Cited by:

    1. Vanderlei Kleinschmidt & Roberto Meurer, 2008. "Interdependence in conditional variances between Latin American stock markets," Anais do XXXVI Encontro Nacional de Economia [Proceedings of the 36th Brazilian Economics Meeting] 200807211543080, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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