Shock Transmission and Coupling with External Stock Markets: Assymetric Effects and Structural Break

María José Meléndez C., Marco Morales and Guillermo Yáñez C.

Journal Economía Chilena (The Chilean Economy), 2011, vol. 14, issue 3, 41-56

Abstract: In this article, we analyze the effects of shock transmissions from selected advanced financial markets—Tokyo, New York, Paris and Frankfurt— to Santiago de Chile and Sao Paulo (Bovespa) as a control. This research focuses on the recent financial crises of 2007 and 2008 where the transmission flowed from the developed world towards emerging markets, such as Chile. Our analysis incorporates the transmission effects in mean, variance and covariance. For the mean equation, we implemented a non-restricted VAR model. For the variance component, we modeled a specification with asymmetric effects. The covariance and correlation effects are estimated using a conditional dynamic asymmetric model based on the dynamic conditional correlation model of Engle, testing for the possibility of long run structural breaks in correlations between financial markets. We found strong evidence of structural breaks increasing correlations during the recent financial crisis. Our results are consistent with international evidence.

Date: 2011
References: Add references at CitEc
Citations:

Downloads: (external link)
https://si2.bcentral.cl/public/pdf/revista-economi ... n3dic2011pp41-56.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchec:v:14:y:2011:i:3:p:41-56

Access Statistics for this article

Journal Economía Chilena (The Chilean Economy) is currently edited by Álvaro Aguirre, Sofía Bauducco and Andrés Fernández

More articles in Journal Economía Chilena (The Chilean Economy) from Central Bank of Chile Contact information at EDIRC.
Bibliographic data for series maintained by Fredherick Sanllehi ().