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A Dynamic Factor Analysis of Financial Contagion in Asia

Author

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  • Andrea Cipollini

    (Queen Mary, University of London)

  • George Kapetanios

    (Queen Mary, University of London)

Abstract

In this paper we compared the performance of country specific and regional indicators of reserve adequacy in predicting, out of sample, the balance of payment crisis affecting the South East Asian region during the 1997-98 period. A Dynamic Factor method was used to retrieve reserve adequacy indicators. The empirical findings suggest clear evidence of financial contagion.

Suggested Citation

  • Andrea Cipollini & George Kapetanios, 2003. "A Dynamic Factor Analysis of Financial Contagion in Asia," Working Papers 498, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:498
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    File URL: https://www.qmul.ac.uk/sef/media/econ/research/workingpapers/2003/items/wp498.pdf
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    References listed on IDEAS

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    7. George Kapetanios & Massimiliano Marcellino, 2003. "A Comparison of Estimation Methods for Dynamic Factor Models of Large Dimensions," Working Papers 489, Queen Mary University of London, School of Economics and Finance.
    8. Mr. Evan C Tanner, 2002. "Exchange Market Pressure, Currency Crises, and Monetary Policy: Additional Evidence From Emerging Markets," IMF Working Papers 2002/014, International Monetary Fund.
    9. Eichengreen, Barry & Rose, Andrew & Wyplosz, Charles, 1996. "Contagious Currency Crises: First Tests," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 463-484, December.
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    Cited by:

    1. Cipollini, A. & Kapetanios, G., 2009. "Forecasting financial crises and contagion in Asia using dynamic factor analysis," Journal of Empirical Finance, Elsevier, vol. 16(2), pages 188-200, March.

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    More about this item

    Keywords

    Financial contagion; Dynamic factor model;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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