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Did Globalization Kill Contagion?

Olivier Accominotti (), Marie Brière, Aurore Burietz (), Kim Oosterlinck () and Ariane Szafarz

No 14395, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Does financial globalization lead to contagion? We scrutinize linkages between international stock markets in a long historical perspective (1880-2014). Our results highlight that without globalization, contagion cannot exist. However, if cross-market correlations are very high, globalization kills contagion. We show that financial contagion was absent from stock markets in both the period of deglobalization of 1918-1971 and the era of "extreme" globalization of 1972-2014 but was present in the period of "moderate" globalization of 1880-1914. Our results suggest that contagion could become a significant problem if financial markets return to a more moderate level of globalization.

Keywords: contagion; economic integration; Financial history; Globalization; market interdependence; Stock market (search for similar items in EconPapers)
JEL-codes: E44 F36 F65 G15 N20 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-his, nep-int and nep-mac
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