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Strategies to Test Contagion
There are several ways to empirically study
contagion. At least five strategies have been used to show
cross-country spillover beyond fundamental links.
- Unexplained
Correlations: A series of papers study contagion by
testing whether asset prices across countries are still
correlated, once they control for market fundamentals.
- Contagious
News: Another set of papers test contagion by studying
whether markets respond to other countries' news or to
foreign "concerns." In other words, do foreign
news and no news have spillover effects?
- Increasing
Probabilities: Other papers test whether the probability
of a crisis increases when there is a crisis somewhere
else.
- Testing
coefficients: Other papers test whether particular
coefficients are significant or are of certain size. The
models estimated vary and include simple regressions,
VARs, GARCH models, and Markov-switching models.
- Co-incidence
of Extreme Returns: This approach studies the coincidence
of extreme return shocks across countries within a region
and across regions that cannot be explained by linear
propagation models of shocks.
Unexplained
Correlations
| Capital Flows to Latin America: Is There Evidence of Contagion Effects? |
| Sara Calvo, The World Bank |
| Carmen M. Reinhart, University of Maryland |
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| 9/1/1995 |
| Click
here to access - 60 KB PDF |
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| Co-movements Among Emerging Equity Markets |
| Holger Wolf, The World Bank |
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| Click
here to access - 667 KB PDF |
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| Contagion in Latin America: Definitions, Measurement, and Policy Implications |
| Kristin J. Forges |
| Roberto Rigobon |
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| NBER Working Paper No. W7885 |
| National Bureau of Economic Research |
| 9/1/2000 |
| Click
here to access - 363 KB PDF |
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| Contagion: How To Measure It? |
| Roberto Rigobon, Inter American Development Bank |
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| NBER Working Paper No. W8118 |
| National Bureau of Economic Research |
| 2/1/2001 |
| Click
here to access - 2,423 KB PDF |
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| Emerging Markets Contagion: Evidence and Theory |
| Rodrigo Valdes, Banco Central de Chile |
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| 3/1/1997 |
| Click
here to access - website |
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| Empirical Modelling of Contagion: A Review of Methodolgies |
| Mardi Dungey, CERF, Cambridge University |
| Renee Fry, Australian National University |
| Brenda Gonzalez-Hermosillo, International Monetary Fund |
| Vance L. Martin, University of Melbourne |
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| 10/1/2003 |
| Click
here to access - 330 KB PDF |
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| Identification Through Heteroskedasticity: Measuring Contagion Between Agrentinean and Mexican Sovereign Bonds |
| Roberto Rigobon |
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| NBER Working Paper No. W7493 |
| National Bureau of Economic Research |
| 1/1/2000 |
| Click
here to access - 2,389 KB PDF |
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| Measuring Contagion with a Bayesian, Time-Varying Coefficient Model |
| Mattea Ciccarelli, European Central Bank |
| Alessandro Rebucci, International Monetary Fund (IMF) |
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| International Monetary Fund (IMF) |
| 5/3/2003 |
| Click
here to access - 511 KB PDF |
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| Measuring Contagion: Conceptual and Empirical Issues |
| Kristin Forbes - Professor, MIT |
| Roberto Rigobon, Inter American Development Bank |
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| 12/13/1999 |
| Click
here to access - 170 KB PDF |
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| No Contagion, Only Interdependence: Measuring Stock Market Co-Movements |
| Kristin Forbes - Professor, MIT |
| Roberto Rigobon, Inter American Development Bank |
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| 2/1/2000 |
| Click
here to access - 376 KB PDF |
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| Perspective on Empirical Studies of Contagion and Interdependence, A |
| Giancarlo Corsetti, Yale University |
| Massimo Sbracia, Bank of Italy |
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| 12/1/2000 |
| Click
here to access - 329 KB PDF |
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| Primer on Financial Contagion, A |
| Marcello Pericoli |
| Massimo Sbracia, Bank of Italy |
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| Temi Di Discussione; No. 407 |
| Banca D'Italia |
| 6/1/2001 |
| Click
here to access - 361 KB PDF |
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| Testing for Contagion Using Correlations: Some Words Of Caution |
| Mardi Dungey , Australian National University |
| Diana Zhumabekova, Australian National University and Visiting Scholar Center for Pacific Basin Monetary and Economic Studies (Federal Reserve Bank of San Francisco) |
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| Pacific Basin Working Paper No. PB01-09 |
| Federal Reserve Bank of San Francisco |
| 9/1/2001 |
| Click
here to access - 419 KB PDF |
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Contagious News
| Correlation Analysis of Financial Contagion: What One Should Know Before Running a Test |
| Giancarlo Corsetti |
| Marcello Pericoli |
| Massimo Sbracia |
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| Discussion Paper (US); No. 822 |
| Economic Growth Center, Yale University |
| 4/1/2001 |
| Click
here to access - 987 KB PDF |
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| Emerging Markets Instability: Do Sovereign Ratings Affect Country Risk And Stock Returns? |
| Graciela Kaminsky, George Washington University |
| Sergio L. Schmukler, World Bank |
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| World Bank |
| 1/1/2002 |
| Click
here to access - 831 KB PDF |
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| Financial Market Contagion in the Asian Crisis |
| Taimur Baig - Economist, International Monetary Fund |
| Ilan Goldfajn - Professor, Pontificia Universidade Catolica |
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| Click
here to access - 3,075 KB PDF |
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| News Spillovers in the Sovereign Debt Market |
| Amar Gande, Owen Graduate School of Management |
| David Parsley, Owen Graduate School of Management |
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| Journal of Fianancial Economics |
| Vanderbilt University |
| 8/1/2003 |
| Click
here to access - 298 KB PDF |
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| What Triggers Market Jitters? A Chronicle of the Asian Crisis |
| Graciela L. Kaminsky - Professor, George Washington, University |
| Sergio L. Schmukler - Financial Economist, The World Bank |
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| 3/1/1999 |
| Click
here to access - 443 KB PDF |
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Increasing
Probabilities
| Contagion, Monsoons, and Domestic Turmoil in Indonesia: A Case Study in the Asian Currency Crisis |
| Valerie Cerra |
| Sweta Chaman Saxena, International Monetary Fund (IMF) |
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| 3/1/2000 |
| Click
here to access - 887 KB PDF |
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| Contagious Currency Crises |
| Barry Eichengreen - Professor, UC Berkeley |
| Andrew K. Rose |
| Charles Wyplosz |
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| NBER Working Paper No. W5681 |
| National Bureau of Economic Research |
| 7/1/1996 |
| Click
here to access - 2,023 KB PDF |
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| On Crises, Contagion, and Confusion |
| Graciela L. Kaminsky |
| Carmen M. Reinhart |
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| Journal of International Economics; V. 51. No. 1 |
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| 6/1/2000 |
| Click
here to access - Coming Soon |
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| On Crises, Contagion, and Confusion |
| Graciela L. Kaminsky - Professor, George Washington, University |
| Carmen M. Reinhart, University of Maryland |
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| 12/10/1998 |
| Click
here to access - 141 KB PDF |
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| Primer on Financial Contagion, A |
| Marcello Pericoli |
| Massimo Sbracia, Bank of Italy |
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| Temi Di Discussione; No. 407 |
| Banca D'Italia |
| 6/1/2001 |
| Click
here to access - 361 KB PDF |
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Testing
Coefficients
| Determinants of Private Capital Flows in the 1970s and 1990s: Is There Evidence of Contagion? |
| Leonardo Hernandez |
| Pamela Mellado |
| Rodrigo O. Valdes |
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| IMF Working Paper WP/01/64 |
| International Monetary Fund (IMF) |
| 5/1/2001 |
| Click
here to access - 986 KB PDF |
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| Interest Rate Volatility and Contagion in Emerging Markets: Evidence from the 1990s |
| Sebastian Edwards |
| Raul Susmel |
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| NBER Working Paper No. W7813 |
| National Bureau of Economic Research |
| 7/1/2000 |
| Click
here to access - 309 KB PDF |
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| Interest Rates, Contagion and Capital Controls |
| Sebastian Edwards |
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| NBER Working Paper No. W7801 |
| National Bureau of Economic Research |
| 7/1/2000 |
| Click
here to access - 406 KB PDF |
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| Measuring Contagion with a Bayesian, Time-Varying Coefficient Model |
| Mattea Ciccarelli, European Central Bank |
| Alessandro Rebucci, International Monetary Fund (IMF) |
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| International Monetary Fund (IMF) |
| 5/3/2003 |
| Click
here to access - 511 KB PDF |
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| Primer on Financial Contagion, A |
| Marcello Pericoli |
| Massimo Sbracia, Bank of Italy |
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| Temi Di Discussione; No. 407 |
| Banca D'Italia |
| 6/1/2001 |
| Click
here to access - 361 KB PDF |
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Co-incidence
of Extreme Returns
| New Approach to Measuring Financial Contagion, A |
| Kee-Hong Bae |
| Andrew G. Karolyi |
| Rene M. Stulz, Charles A. Dice Center for Research in Financial Economics |
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| 8/1/2000 |
| Click
here to access - 194 KB PDF |
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This
page last updated on 01/28/2002
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