International Contagion Effects from the Russian Crisis and the Ltcm Near-Collapse

48 Pages Posted: 15 Feb 2006

See all articles by Mardi Dungey

Mardi Dungey

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

Renée Fry

affiliation not provided to SSRN

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 2002

Abstract

We examine empirically the episode of extraordinary turbulence in global financial markets during 1998. The analysis focuses on the market assessment of credit risk captured by daily movements in bond spreads for twelve countries. A dynamic latent factor model is estimated using indirect inference to quantify the effects of unanticipated shocks across borders or "contagion," controlling for common global shocks, country-specific shocks and regional factors. The results show that there were substantial international contagion effects resulting from both the Russian and LTCM crises. The proportion of volatility explained by contagion is not necessarily larger in developing than in developed nations.

Keywords: financial crises contagion effects international spillovers Russia LTCM

JEL Classification: C33 E44 F34

Suggested Citation

Dungey, Mardi and Fry, Renée and González-Hermosillo, Brenda and Martin, Vance L., International Contagion Effects from the Russian Crisis and the Ltcm Near-Collapse (April 2002). IMF Working Paper No. 02/74, Available at SSRN: https://ssrn.com/abstract=879584

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

Renée Fry

affiliation not provided to SSRN

No Address Available

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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