Contagion and interdependence among Central European economies: the impact of common external shocks

Sébastien Wälti ()
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Sébastien Wälti: IUHEI
Authors registered in the RePEc Author Service: Sébastien Waelti

No 02-2003, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: This paper is about contagion and interdependence among Central European economies. It investigates the extent to which country-specific shocks spread across these countries beyond the normal channels of interdependence, taking into account common external shocks. To model such shocks, we make use of market interest rates and more precise measures of the stance of U.S. monetary policy, the U.S. stock market and we control for the impact of the 1999 Brazilian crisis. The results show that common external shocks affect Central European economies to a significant extent. Moreover, the transmission mechanism of country-specific shocks changes in the face of abnormal high-volatility events. The existence of contagion and the effects of common external shocks have important implications for the candidate countries in the transition phase to the accession to EMU.

Keywords: Contagion; interdependence; international financial markets; transition economies; Eastern Europe; Russian crisis (search for similar items in EconPapers)
Pages: 27
Date: 2003-01
New Economics Papers: this item is included in nep-eec, nep-ifn and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heiwp02-2003

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