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Spatial Contagion of Global Financial Crisis

Author

Listed:
  • Ari Tjahjawandita

    () (Department of Economics, Padjadjaran University)

  • Tito Dimas Pradono

    () (Department of Economics, Padjadjaran University)

  • Rullan Rinaldi

    () (Department of Economics, Padjadjaran University)

Abstract

The global financial crisis triggered by the credit crisis in the USA as its epicenter,quickly spread across the globe. The crisis starts spreading around the world in the middle of 2007 and along the 2008, where stock markets in major economies fell, followed by collapses of large companies and leading financial institutions. In a world where economies are integrated, the spread of such crisis is unavoidable. In this paper, we try to estimate the spill over effect of the global financial crises across borders and regions. Using spatial econometrics method we employ distance based weight matrix to estimate the spatial dependence and spatial heterogeneity of the crises. On the sensitivity analysis, we also employ weights matrix that is corrected by the governance and the economic freedom index to shows how the virtual space of governance, economic institution and regimes affect the spread of the crises.

Suggested Citation

  • Ari Tjahjawandita & Tito Dimas Pradono & Rullan Rinaldi, 2009. "Spatial Contagion of Global Financial Crisis," Working Papers in Economics and Development Studies (WoPEDS) 200906, Department of Economics, Padjadjaran University, revised Aug 2009.
  • Handle: RePEc:unp:wpaper:200906
    as

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    File URL: http://ceds.feb.unpad.ac.id/wopeds/200906.pdf
    File Function: First version, 2009
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    References listed on IDEAS

    as
    1. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
    2. Lestano & Jacobs, Jan & Kuper, Gerard H., 2003. "Indicators of financial crises do work! : an early-warning system for six Asian countries," CCSO Working Papers 200313, University of Groningen, CCSO Centre for Economic Research.
    3. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    4. Mardi Dungey & Renee Fry & Brenda Gonzalez-Hermosillo & Vance Martin, 2005. "Empirical modelling of contagion: a review of methodologies," Quantitative Finance, Taylor & Francis Journals, vol. 5(1), pages 9-24.
    5. Bustelo, Pablo, 2000. "Novelties of financial crises in the 1990s and the search for new indicators," Emerging Markets Review, Elsevier, vol. 1(3), pages 229-251, November.
    6. Becker, Sascha O. & Egger, Peter H. & Seidel, Tobias, 2009. "Common political culture: Evidence on regional corruption contagion," European Journal of Political Economy, Elsevier, vol. 25(3), pages 300-310, September.
    7. Burkart, Oliver & Coudert, Virginie, 2002. "Leading indicators of currency crises for emerging countries," Emerging Markets Review, Elsevier, vol. 3(2), pages 107-133, June.
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    Cited by:

    1. Umberto Muratori, 2014. "Contagion in the Euro Area Sovereign Bond Market," Social Sciences, MDPI, Open Access Journal, vol. 4(1), pages 1-17, December.
    2. Leila Ali & Marie Lebreton, 2013. "The Fall of Bretton Woods: Which Geography Matters?," Economics Bulletin, AccessEcon, vol. 33(2), pages 1396-1419.

    More about this item

    Keywords

    Global Financial Crises; Spillover Effect; Institutions; Globalization; Spatial Econometrics;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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