Financial Contagion in the Recent Financial Crisis: Evidence from the Romanian Capital Market

Cărăușu Dumitru-Nicușor ()
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Cărăușu Dumitru-Nicușor: “Alexandru Ioan Cuza" University of Iași

Ovidius University Annals, Economic Sciences Series, 2017, vol. XVII, issue 2, 519-524

Abstract: We use the wavelet analysis in order to investigate if financial contagion occurred between the US and the Romanian capital market in the beginning of the recent economic crisis. Moreover, we test presence of pure and fundamental contagion between the two markets using wavelet coherency analysis and maximal overlap discrete wavelet transform methodology. We find evidence of pure financial contagion between the two markets: during the sub-primes crisis period, the Lehman Brothers collapse and at the beginning of sovereign debt crisis. Furthermore, we find a general short-term increase in interdependence between the two markets in the ex-ante and ex-post Lehman brothers period. Meanwhile, the capital market from Romania and US were in perfect sync during 2007-2009 for high trading time-windows. This implies that the Romanian market was sensitive to short-term shock from the US market, which lead to a long-term fundamental contagion.

Keywords: financial contagion; capital markets; financial crisis; wavelet analysis (search for similar items in EconPapers)
JEL-codes: H83 M42 M48 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ovi:oviste:v:xvii:y:2017:i:2:p:519-524

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