Identification through Heteroskedasticity: Measuring "Contagion: betweenArgentinean and Mexican Sovereign Bonds

Roberto Rigobon

No 7493, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, I develop a new identification method to solve the problem of simultaneous equations, based on heteroskedasticity of the structural shocks. I show that if the heteroskedasticity can be described as a two-regime process, then the system is just identified under relatively weak conditions. Identification is also discussed under more than two regimes, when the residuals exhibit ARCH behavior, and when there are aggregate shocks. This methodology is applied to measure contagion across sovereign bonds between Argentina and Mexico. The estimates of the simultaneous parameters are relatively to different definitions of the regimes.

JEL-codes: C30 F32 (search for similar items in EconPapers)
Date: 2000-01
New Economics Papers: this item is included in nep-ecm
Note: IFM
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Citations: View citations in EconPapers (12)

Published as Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, 09.

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