Contagion, spillover and interdependence

Roberto Rigobon

No 1975, Working Paper Series from European Central Bank

Abstract: This paper reviews the empirical literature on international spillovers and contagion. Theoretical models of spillover and contagion imply that the reduced form observable variables suffer from two possible sources of bias: endogeneity and omitted variables. These econometric problems in combination with the heteroskedasticity that plagues the data produces time varying biases. Several empirical methodologies are evaluated from this perspective: non-parametric techniques such as correlations and principal components, as well as parametric methods such as OLS, VAR, event studies, ARCH, Non-linear regressions, etc. The paper concludes that there is no single technique that can solve the full fledge problem and discusses three methodologies that can partially address some of the questions in the literature. JEL Classification: C30, F32, C10

Keywords: contagion; heteroskedasticity; identification (search for similar items in EconPapers)
Date: 2016-11
New Economics Papers: this item is included in nep-cse and nep-net
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Citations: View citations in EconPapers (25)

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Related works:
Journal Article: Contagion, Spillover, and Interdependence (2019)
Working Paper: Contagion, spillover and interdependence (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20161975

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