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The Asian Crisis Contagion: A Dynamic Correlation Approach Analysis

  • Essahbi Essaadi

    ()

    (Unité d'Analyse Quantitative Appliquée (UAQUAP)-ISG Tunis and GATE (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)

  • Walih Khallouli

    ()

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

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

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Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 0725.

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Length: 22 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:gat:wpaper:0725
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