Unanticipated Shocks and Systemic Influences: The Impact of Contagion in Global Equity Markets in 1998

28 Pages Posted: 29 Jan 2006

See all articles by Mardi Dungey

Mardi Dungey

University of Cambridge - Cambridge Endowment for Research in Finance (CERF)

Renee Fry

Australian National University (ANU) - Department of Economics

Brenda González-Hermosillo

International Monetary Fund; Massachusetts Institute of Technology

Vance L. Martin

University of Melbourne - Department of Economics; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Date Written: April 2003

Abstract

August to September 1998 has been characterized as one of the worst episodes of global financial distress in decades. This paper investigates the transmission of the Russian and the LTCM crises through global equity markets using a panel of 14 developing and industrial countries. The results show that contagion was systemic during the period, with industrial countries providing the dominant cross-country transmission linkages. Both crises reinforced each other, highlighting the importance of studying them jointly. An implication of the empirical results is that models of contagion that exclude industrial countries are potentially misspecified and may yield misleading outcomes.

Keywords: Financial Crises, Contagion, International Spillovers, Russia, LTCM, Equity Markets

JEL Classification: C33, E44, F34

Suggested Citation

Dungey, Mardi and Fry, Renee and González-Hermosillo, Brenda and Martin, Vance L., Unanticipated Shocks and Systemic Influences: The Impact of Contagion in Global Equity Markets in 1998 (April 2003). IMF Working Paper No. 03/84, Available at SSRN: https://ssrn.com/abstract=879160

Mardi Dungey (Contact Author)

University of Cambridge - Cambridge Endowment for Research in Finance (CERF) ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.dungey.bigpondhosting.com

Renee Fry

Australian National University (ANU) - Department of Economics ( email )

Canberra, Australian Capital Territory 2600
Australia

Brenda González-Hermosillo

International Monetary Fund ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4210 (Phone)
202-589-4210 (Fax)

Massachusetts Institute of Technology ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Vance L. Martin

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

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