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Spillover Effects of the U.S. Financial Crisis on Financial Markets in Emerging Asian Countries

Bong-Han Kim, Hyeongwoo Kim () and Bong-Soo Lee

No auwp2012-06, Auburn Economics Working Paper Series from Department of Economics, Auburn University

Abstract: We examine spillover effects of the recent U.S. financial crisis on five emerging Asian countries by estimating conditional correlations of financial asset returns across countries using multivariate GARCH models. We propose a novel approach that simultaneously estimates the conditional correlation coefficient and the effects of its determining factors over time, which can be used to identify the channels of spillovers. We find some evidence of financial contagion around the collapse of Lehman Brothers in September 2008. We further find a dominant role of foreign investment for the conditional correlations in international equity markets. The dollar Libor-OIS spread, the sovereign CDS premium, and foreign investment are found to be significant factors affecting foreign exchange markets.

Keywords: Financial Crisis; Spillover Effects; Contagion; Emerging Asian Countries; Dynamic Conditional Correlation; DCCX-MGARCH (search for similar items in EconPapers)
JEL-codes: C32 F31 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-fmk and nep-ifn
Date: 2012-10
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Related works:
Journal Article: Spillover effects of the U.S. financial crisis on financial markets in emerging Asian countries (2015) Downloads
Working Paper: Spillover Effects of the U.S. Financial Crisis on Financial Markets in Emerging Asian Countries (2015) Downloads
Working Paper: Spillover Effects of the US Financial Crisis on Financial Markets in Emerging Asian Countries (2011) Downloads
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