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SHOCKS AND SYSTEMIC INFLUENCES: CONTAGION IN GLOBAL EQUITY MARKETS IN 1998

Mardi Dungey (), Renee Fry-McKibbin (), Brenda Gonzales-Hermosillo and Vance Martin

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: The transmission of the financial crises in 1998 through international equity markets is estimated through a multi-factor model of financial markets specifically allowing for contagion effects. The application measures the strength of contagion emanating from the Russia crisis of 1998, and the LTCM near collapse, using a panel of 10 emerging and developed financial markets. Pre and post default periods for Russia are distinguished. The results show that contagion is significant and widespread from both crises, although the LTCM crisis has more impact on developed than emerging markets. Consistent with the existing literature, regional effects are found to be strong during financial crises. Asian markets are found to be relatively immune from contagion, perhaps reflecting the effect of their own recent crisis.

JEL-codes: C15 F31 (search for similar items in EconPapers)
Date: 2005-06
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