IDEAS home Printed from
   My bibliography  Save this paper

Modeling financial contagion: approach-based on asymmetric cointegration


  • Lazeni Fofana
  • Françoise SEYTE


We analyze the financial contagion using an approach based on cointégration with asymmetric adjustment TAR and M-TAR. To capture the contagion effect, we consider regime change in the adjustment of the error correction term. We have introduced Threshold Autoregressive model (TAR) and Momentum Threshold Autoregressive model (M TAR) in adjustment mechanism of the error correction model with assumption that the error term exhibits self-excite jump. Our empirical study required the selection of four markets indices such as the CAC40, the FTSE 100, the S&P500 and NIKKEI225. We used these markets to understand the mechanism of shock propagation during the 2007 crisis. The results demonstrate the transmission of shocks by pure contagion from the S&P500 to FTSE100 and the CAC40. In contrast, we found a shocks transmission in the bond of interdependence from the S&P500 to NIKKEI225.

Suggested Citation

  • Lazeni Fofana & Françoise SEYTE, 2012. "Modeling financial contagion: approach-based on asymmetric cointegration," Working Papers 12-21, LAMETA, Universtiy of Montpellier, revised Jun 2012.
  • Handle: RePEc:lam:wpaper:12-21

    Download full text from publisher

    File URL:
    File Function: First version, 2012
    Download Restriction: no

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lam:wpaper:12-21. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Patricia Modat). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.