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Financial Contagion in Emerging Markets: Evidence from the Middle East and North Africa

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  • Thomas Lagoarde-Segot
  • Brian Lucey

Abstract

The purpose of this paper is to investigate vulnerability to financial contagion in a set of expanding emerging markets of the Middle East and North Africa, during seven episodes of international financial crisis. Using Fry & Baur (2005) fixed-effect panel approach, we significantly reject the hypothesis of a joint regional contagion. However, using a battery of bivariate contagion tests based on Forbes and Rigobon (2002), Corsetti (2002), and Favero and Giavazzi (2002), we find evidence that each of the investigated markets suffered from contagion at least once out of the seven investigated crises. In conformity with the literature, our results suggest that the probability of being affected by contagion seems to increase as the MENA markets develop in size and liquidity, and become more integrated to the world’s markets.

Suggested Citation

  • Thomas Lagoarde-Segot & Brian Lucey, 2006. "Financial Contagion in Emerging Markets: Evidence from the Middle East and North Africa," The Institute for International Integration Studies Discussion Paper Series iiisdp114, IIIS.
  • Handle: RePEc:iis:dispap:iiisdp114
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    Cited by:

    1. Neaime, Simon, 2015. "Are emerging MENA stock markets mean reverting? A Monte Carlo simulation," Finance Research Letters, Elsevier, vol. 13(C), pages 74-80.

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