Does the contagion effect of the Balance of Payment crisis exist? Ukrainian case

Vasyl Khomiak
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Vasyl Khomiak: Taras Shevchenko National University of Kyiv, Ukraine

Review of Applied Socio-Economic Research, 2013, vol. 6, issue 2, 151-159

Abstract: This paper aims at discussing and testing hypotheses about the contagion effect of the Balance of Payment (BoP) crisis on Ukrainian data. A review of the last highlighted discussions about the contagion effect and its impact on economy by applying traditional or spatial econometrics technique is made in paper. The main innovation of this paper is an attempt to test the contagion effect for Ukraine. Observing the evolution of the BoP crisis from the 1990s up to now, it is clear that the contagion effect becomes a main trigger of crisis. In order to measure the impact of the contagion effect on crisis, the exchange market pressure index (EMPI) is calculated for Ukraine and its main partner countries. Estimation output shows that impact from the neighboring countries on Ukraine is much stronger during and after crisis episodes than before. Another approach based on received impulse function after VAR model estimation presents impact of the contagion effect. Insample forecast of the EMP index of Ukraine, based on different specifications, supports an idea about including external factors that help to express influence of the contagion effect. Finally, paper shows that contagion effect is one of the main triggers of the Balance of Payment crisis. Today the BoP crisis could not embrace just one country, and it becomes at least a problem for the whole region.

Keywords: Balance of Payment crisis; contagion effect; exchange market pressure index (search for similar items in EconPapers)
JEL-codes: E47 F47 (search for similar items in EconPapers)
Date: 2013
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