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Debt and Financial Market Contagion

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  • Cody Yu-Ling Hsiao

    (School of Economics, Australian School of Business, the University of New South Wales)

  • James Morley

    (School of Economics, Australian School of Business, the University of New South Wales)

Abstract

We investigate the role of public, private, and external debt in explaining the propagation of nancial shocks during three major nancial crises from 2007-2013. For our analysis, we construct indices of crisis severity in equity markets based on di¤erent tests of contagion and investigate whether the transmission of crises across countries can be related to similar debt conditions. We compare the role of debt stocks and ows to traditional channels for contagion based on regional and trade linkages. Our main nding is that, along with regional linkages, public and external debt play a more important role than trade linkages in driving contagion across equity markets.

Suggested Citation

  • Cody Yu-Ling Hsiao & James Morley, 2015. "Debt and Financial Market Contagion," Discussion Papers 2015-02, School of Economics, The University of New South Wales.
    • Handle: RePEc:swe:wpaper:2015-02
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    6. Xing, Xiaoyun & Xu, Zihan & Chen, Ying & Ouyang, WenPei & Deng, Jing & Pan, Huanxue, 2023. "The impact of the Russia–Ukraine conflict on the energy subsector stocks in China: A network-based approach," Finance Research Letters, Elsevier, vol. 53(C).

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    More about this item

    Keywords

    Contagion; debt; European debt crisis; nancial crisis; Great Recession; trade linkages; regional linkages;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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