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On the Stability of Domestic Financial Market Linkages in the Presence of time-varying Volatility

  • Thomas J. Flavin
  • Ekaterini Panopoulou
  • Deren Unalmis

We analyze the stability of domestic financial linkages between periods of calm and turbulent market conditions. Our model develops a simultaneous test of shift contagion and bi-directional pure contagion, which is applied to the equity and currency markets of a group of East Asian emerging economies. Our results show a great deal of instability in these markets with widespread evidence of pure contagion in both directions. There is less evidence of shift contagion with the transmission of common shocks unchanged between regimes for the majority of countries.

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Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 0810.

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Date of creation: 2008
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Handle: RePEc:tcb:wpaper:0810
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  1. Hartmann, Philipp & Straetmans, Stefan & de Vries, Casper, 2001. "Asset market linkages in crisis periods," Working Paper Series 0071, European Central Bank.
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  25. Thomas J. Flavin and Ekaterini Panopoulou, 2007. "Detecting Shift and Pure Contagion in East Asian Equity Markets: A Unified Approach," The Institute for International Integration Studies Discussion Paper Series iiisdp236, IIIS.
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