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Evidence of interdependence and contagion using a frequency domain framework

Vincent Bodart and Bertrand Candelon ()

Emerging Markets Review, 2009, vol. 10, issue 2, 140-150

Abstract: This paper proposes a new measure of contagion, based on the frequency analysis of causality developed recently by Breitung and Candelon [Breitung, J., Candelon, B. 2006. Testing for short and long-run causality: a frequency domain approach, Journal of Econometrics, 12, 363-378.]. This approach handles several of the statistical problems identified in the literature. It also permits clear differentiation between temporary and permanent shifts in cross-market linkages: the first case is contagion while the second one is simply a measure of interdependence among markets. With this new approach, we examine the "Tequila" and Asian crises and find evidence of contagion for both. During the Asian crisis, higher interdependence has also contributed to the diffusion of the crisis in Asia.

Keywords: Contagion; Financial; crisis; Causality; test; Frequency; domain (search for similar items in EconPapers)
Date: 2009
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Working Paper: Evidences of interdependence and contagion using a frequency domain framework (2005) Downloads
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