Testing contagion of the 1997-98 crisis in Asian stock markets with structural breaks and incubation periods

In-Mee Baek and Jongbyung Jun

Journal of Asian Economics, 2011, vol. 22, issue 5, 356-368

Abstract: This study tests for the existence of financial contagion, using a method that allows an incubation period before contagion takes effect. We define contagion as an increase in cross-market linkages following shocks. With daily data on Asian stock markets during the 1997-98 crisis, we find significant upward shifts in the linkages between the Asian markets of both crisis and non-crisis countries. The upward shifts are maintained even after controlling for heteroskedasticity and common world and regional factors, providing strong evidence for financial contagion.

Keywords: Crisis; contagion; Financial; crisis; Structural; break; Asian; market (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:22:y:2011:i:5:p:356-368

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