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Did Globalization Kill Contagion?

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  • Accominotti, Olivier
  • Brière, Marie
  • Burietz, Aurore
  • Oosterlinck, Kim
  • Szafarz, Ariane

Abstract

Does financial globalization lead to contagion? We scrutinize linkages between international stock markets in a long historical perspective (1880-2014). Our results highlight that without globalization, contagion cannot exist. However, if cross-market correlations are very high, globalization kills contagion. We show that financial contagion was absent from stock markets in both the period of deglobalization of 1918-1971 and the era of "extreme" globalization of 1972-2014 but was present in the period of "moderate" globalization of 1880-1914. Our results suggest that contagion could become a significant problem if financial markets return to a more moderate level of globalization.

Suggested Citation

  • Accominotti, Olivier & Brière, Marie & Burietz, Aurore & Oosterlinck, Kim & Szafarz, Ariane, 2020. "Did Globalization Kill Contagion?," CEPR Discussion Papers 14395, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:14395
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    Keywords

    contagion; economic integration; Financial history; Globalization; market interdependence; Stock market;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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