 Identifying and measuring the contagion channels at work in the European financial crisesMassimo Guidolin and Manuela Pedio (manuela.pedio@bristol.ac.uk) Journal of International Financial Markets, Institutions and Money, 2017, vol. 48, issue C, 117-134 Abstract: We investigate the phenomenon of contagion with a special focus on the recent financial crisis, distinguishing four alternative channels, namely the flight-to-quality, flight-to-liquidity, risk premium, and correlated information channels. Specifically, we employ the differences among estimates and impulse response functions across linear and nonlinear models to identify and measure cross-asset contagion. An application to weekly Eurozone data for a 2007–2014 sample reveals that a two-state Markov switching model shows economically weak, though accurately estimated, contagion effects in a crisis regime. These findings are mainly explained by a flight-to-quality channel. Furthermore, we extend our analysis to explore whether European markets may or may not have been subject to contagion when exposed to external shocks, such as those originated from the US subprime crisis. Keywords: Contagion channels; Markov switching models; Vector autoregressions; Impulse response function; Flight-to-quality; Flight-to-liquidity; Risk premium (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:48:y:2017:i:c:p:117-134 DOI: 10.1016/j.intfin.2017.01.001 Access Statistics for this article Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely More articles in Journal of International Financial Markets, Institutions and Money from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to econpapers@oru.se.
EconPapers is hosted by the
School of Business at Örebro University.