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Unanticipated Shocks and Systemic Influences; The Impact of Contagion in Global Equity Markets in 1998

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

No 03/84, IMF Working Papers from International Monetary Fund

Abstract: August to September 1998 has been characterized as one of the worst episodes of global financial distress in decades. This paper investigates the transmission of the Russian and the LTCM crises through global equity markets using a panel of 14 developing and industrial countries. The results show that contagion was systemic during the period, with industrial countries providing the dominant cross-country transmission linkages. Both crises reinforced each other, highlighting the importance of studying them jointly. An implication of the empirical results is that models of contagion that exclude industrial countries are potentially misspecified and may yield misleading outcomes.

Keywords: Bond markets; Financial crisis; Financial crises; Equity markets; Russian Federation; Contagion, International Spillovers, Russia, LTCM, financial markets, bond, equity market, Multiple or Simultaneous Equation Models: Models with Panel Data, Financial Markets and the Macroeconomy, International Lending and Debt Problems, (search for similar items in EconPapers)
Date: 2003-04-01
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Handle: RePEc:imf:imfwpa:03/84