Evaluation of Contagion or Interdependence in the Financial Crises of Asia and Latin America, Considering the Macroeconomic Fundamentals
Emerson Fernandes Marçal
Mackenzie Presbyterian University; Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics
Pedro L. Valls Pereira
Sao Paulo School of Economics - FGV and CEQEF- FGV
Diógenes Manoel Leiva Martin
Wilson Toshiro Nakamura
Mackenzie Presbiterian University - PPGAE
January 1, 2007
This article investigates the existence of contagion between countries on the basis of an analysis of returns for stock indices over the period 1994-2003. The economic methodology used is that of multivariate GARCH family volatility models, particularly the DCC models in the form proposed by Engle and Sheppard (2001). The returns were duly corrected for a series of country-specific fundamentals. The relevance of this procedure is highlighted in the literature by the work of Pesaran and Pick (2003). The results obtained in this paper provide evidence favourable to the hypothesis of regional contagion in both Latin America and Asia. As a rule, contagion spread from the Asian crisis to Latin America but not in the opposite direction.
Number of Pages in PDF File: 20
Keywords: Contagion, Interdependence, Financial Crisis
JEL Classification: C10, C123, G10, G15working papers series
Date posted: September 20, 2007 ; Last revised: April 13, 2009
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