The Transmission of Foreign Financial Crises to South Africa: A Firm-Level Study
Journal for Studies in Economics and Econometrics, Vol. 30, No. 2, pp. 61-85, 2006
25 Pages Posted: 27 Mar 2010
Date Written: 2006
The process of financial integration has increased the exposure of South African financial markets to foreign financial crises. This paper contributes to the understanding of crisis transmission by evaluating several hypotheses that claim to explain how financial crises are transmitted to South African financial markets. The study proceeds from a firm-level perspective, which it argues overcomes the potential loss of information when using aggregate economic data. Consequently, the different transmission hypotheses are evaluated for the East Asian, Russian and Argentinean crises using firm-level daily stock return data from the JSE Securities Exchange. A multivariate regression model, supplemented by sensitivity tests, forms the core of the empirical methodology.
Keywords: contagion, South Africa, financial crisis, transmission, financial markets
JEL Classification: G01, G15
Suggested Citation: Suggested Citation