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 2003/084, 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: WP; transmission mechanism; Financial Crises; Contagion; International Spillovers; Russia; LTCM; Equity Markets; LTCM crisis; LTCM period; hedge fund LTCM; contagion from Russia; Russia's default; crisis transmission; market participant; LTCM to Russia; Stock markets; Stocks; Emerging and frontier financial markets; Securities markets; Factor models; Global; Eastern Europe; Asia and Pacific (search for similar items in EconPapers)
Pages: 28
Date: 2003-04-01
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Citations: View citations in EconPapers (14)

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