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

Lagoarde-Segot, Thomas; Lucey, Brian M.

doi:10.2139/ssrn.922278

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

IIIS Discussion Paper No. 114

30 Pages Posted: 8 Aug 2006

See all articles by Thomas Lagoarde-Segot

Brian M. Lucey

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

There are 2 versions of this paper

Date Written: January 2006

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: Contagion, Emerging Markets, Middle East and North Africa

JEL Classification: G11, G12. G15

Suggested Citation: Suggested Citation

Lagoarde-Segot, Thomas and Lucey, Brian M., Financial Contagion in Emerging Markets: Evidence from the Middle East and North Africa (January 2006). IIIS Discussion Paper No. 114, Available at SSRN: https://ssrn.com/abstract=922278 or http://dx.doi.org/10.2139/ssrn.922278