Extreme Interdependence and Extreme Contagion between Emerging Markets

Fazio, Giorgio (2004) Extreme Interdependence and Extreme Contagion between Emerging Markets. Discussion paper. University of Strathclyde, Glasgow.

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Abstract

This paper presents a methodology to identify contagion between exchange market pressure events in different countries, based on a set of seemingly unrelated probit equations. This technique allows us to separate the transmission due to broadly defined macroeconomic interdependence, and contagion due to herding, avoiding some of the caveats of the more traditional cross-correlation approach. We find evidence of pure contagion only for a limited number of country pairs which, with few notable exceptions, belong to the same region. In some instances, a reduction in speculative pressure can be identified between countries located in different regions. This evidence seems to suggests that the spreading of crises can be triggered by sudden shifts in investors expectations after an initial crisis episode and that investors tend to discriminate on the basis of location and common macroeconomic weakness or perceived similarity.

  • Item type:Monograph(Discussion paper)
    ID code:67727
    Dates:
    Date
    Event
    June 2004
    Published
    Notes:Published as a paper within the Discussion Papers in Economics, No. 04-10 (2004)
    Subjects:Social Sciences > Commerce
    Department:Strathclyde Business School > Economics
    Depositing user: Pure Administrator
    Date deposited:07 May 2019 15:10
    Last modified:09 Apr 2024 04:42
    URI:https://strathprints.strath.ac.uk/id/eprint/67727
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