Financial Contagion in Emerging Markets: Evidence from the Middle East and North Africa

27 Pages Posted: 2 Nov 2005

See all articles by Thomas Lagoarde-Segot

Thomas Lagoarde-Segot

Euromed Management Marseille

Brian M. Lucey

Trinity Business School, Trinity College Dublin; Abu Dhabi University - College of Business Administration; Shanghai Lixin Univeristy of Accounting and Finance

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Date Written: October 2005

Abstract

The purpose of this paper is to investigate vulnerability to financial contagion in a set of expanding emerging markets of the Middle East and North Africa, during seven episodes of international financial crisis. Using Fry & Baur (2005) fixed-effect panel approach, we significantly reject the hypothesis of a joint regional contagion. However, using a battery of bivariate contagion tests based on Forbes and Rigobon (2002), Corsetti (2002), and Favero and Giavazzi (2002), we find evidence that each of the investigated markets suffered from contagion at least once out of the seven investigated crises. In conformity with the literature, our results suggest that the probability of being affected by contagion seems to increase as the MENA markets develop in size and liquidity, and become more integrated to the world's markets.

Keywords: Emerging Markets, Contagion, Middle East and North Africa

JEL Classification: G11, G12, G15

Suggested Citation

Lagoarde-Segot, Thomas and Lucey, Brian M., Financial Contagion in Emerging Markets: Evidence from the Middle East and North Africa (October 2005). Available at SSRN: https://ssrn.com/abstract=829604 or http://dx.doi.org/10.2139/ssrn.829604

Thomas Lagoarde-Segot

Euromed Management Marseille ( email )

Domaine de Luminy
BP 921 13288 Marseille Cedex 9, 13288
France

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

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Dublin 2
Ireland
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+353 1 679 9503 (Fax)

Abu Dhabi University - College of Business Administration ( email )

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Abu Dhabi, Abu Dhabi 59911
United Arab Emirates

Shanghai Lixin Univeristy of Accounting and Finance ( email )

Shanghai
China