Spatial contagion in the subprime crisis context: Adjusted correlation versus local correlation approaches

Imen Zorgati and Faten Lakhal

Economic Modelling, 2020, vol. 92, issue C, 162-169

Abstract: This paper investigates the influence of the spatial dimension on financial contagion in the subprime crisis based on adjusted and local correlation measures. Daily series of stock indexes of American and Asian countries are used from January 1, 2003, to December 30, 2011. We consider two groups of countries: the first group includes the United States and countries that are geographically close: Brazil, Argentina, Mexico, and Canada. The second group includes countries that are geographically distant from the United States: Hong Kong, India, Australia, Indonesia, Malaysia, South Korea, China, and Singapore. The results show that simple and adjusted correlations are not enough to explain the spatial effect of contagion. Using local correlations and polynomial regressions, the results show the existence of spatial contagion between the United States and all countries in the American region. As for countries that are geographically distant from the United States, we prove the existence of spatial contagion between only some groups of countries (United States/India, United States/Australia, United States/Indonesia, United States/Malaysia, United States/China). These results have international diversification, and within-industry implications.

Keywords: Contagion; Adjusted correlation; Local correlation; Spatial effect; Polynomial local regression (search for similar items in EconPapers)
JEL-codes: C1 C14 C58 G01 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S026499931930286X
Full text for ScienceDirect subscribers only

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:eee:ecmode:v:92:y:2020:i:c:p:162-169

DOI: 10.1016/j.econmod.2019.12.015

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().