A Dynamic Factor Analysis of Financial Contagion in Asia
Queen Mary Economics Working Paper No. 498
17 Pages Posted: 9 Oct 2003
In this paper we compared the performance of country specific and regional indicators of reserve adequacy in predicting, out of sample, the balance of payment crisis affecting the South East Asian region during the 1997-98 period. A Dynamic Factor method was used to retrieve reserve adequacy indicators. The empirical findings suggest clear evidence of financial contagion.
Keywords: Financial contagion, Dynamic factor model
JEL Classification: C32, C51, F34
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