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Emerging Market Economies: The Aftermath of Volatility Contagion in a Selection of Three Financial Crises

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  • Felipe Jaque

Abstract

This paper examines the volatility contagion resulting from intra- and inter- regional links among emerging economies, on the basis of three major financial crises, namely Mexico 1994, East Asia 1997 and Argentina 2002. In particular, it presents a methodology that uses the sovereign bond spread as the financial time series to determine the impact of the volatility of the first-infected country on the behaviour of other emerging economies. Our main results reveal that only the Asia 1997 crisis had negative effects —both within and outside the region— on other emerging economies, in the form of increased sovereign spread volatility. On the other hand, the crises of Mexico 1994 and Argentina 2002 seem to have caused a minor additional effect on the stability of international markets for emerging bonds.

Suggested Citation

  • Felipe Jaque, 2004. "Emerging Market Economies: The Aftermath of Volatility Contagion in a Selection of Three Financial Crises," Working Papers Central Bank of Chile 305, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:305
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    References listed on IDEAS

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    11. Marcus Miller & Lei Zhang, 1999. "Creditor Panic, Asset Bubbles and Sharks: Three Views of the Asian Crisis," CSGR Hot Topics: Research on Current Issues 07, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
    12. Dornbusch, Rudiger & Park, Yung Chul & Claessens, Stijn, 2000. "Contagion: Understanding How It Spreads," World Bank Research Observer, World Bank Group, vol. 15(2), pages 177-197, August.
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