International Crisis, Instability Periods and Contagion: The Case of the ERM

Emanuele Bacchiocchi and Marta Bevilacqua

No unimi-1079, UNIMI - Research Papers in Economics, Business, and Statistics from Universitá degli Studi di Milano

Abstract: In this paper we propose a two step procedure for modelling the propagation of financial shocks. The first step consists in the estimation, by means of SWARCH models, of the conditional probability of being in a period of high volatility while, in the second step such indicators are included in a structural simultaneous models for interdependences among different countries. The results show that episodes of financial crisis effectively happened during periods of high volatility and that such measures of instability are important in explaining the propagation of devaluation expectations between six European Countries during the ERM period.

Keywords: Contagion; SWARCH models; ERM (search for similar items in EconPapers)
Date: 2008-10-28
Note: oai:cdlib1:unimi-1079
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Journal Article: International crises, instability periods and contagion: the case of the ERM (2009)
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